Thursday, April 25, 2013

Dividend Increase: JNJ

Johnson & Johnson (JNJ) is increasing its quarterly dividend by 8.2%, from $0.61 to $0.66 per share, putting the company on track for its 51st consecutive year of dividend growth (news release). Given that I own 35 shares of JNJ, my quarterly dividend increases from $21.35 to $23.10 and my yield on cost becomes 4.16%. The extra $7.00 in annual dividend income raises my forward 12-month dividend total to $2,413. Thus far this year, there have been dividend increases for 17 of the 28 stocks in my portfolio.

13 comments:

  1. I liked raises from both PG and JNJ. I was hoping to get some shares before the announcements but the markets just didn't give me the chance to. It's a shame PG's price is still as high as it is despite the selloff after announcing earnings.

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    1. PIP: I also liked both of those dividend increases. I wish I had taken advantage of the opportunity to buy more JNJ when it was trading in the mid-60s; I don't think I fully appreciated the value that was in front of me. As for PG, I thought the stock was moderately overvalued before the selloff and remains slightly overvalued. In general, consumer staples stocks are not trading at attractive valuations right now.

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  2. Gosh, I wish this company to crash or something so I can buy more shares!!!

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    1. Martin: I also want to buy more shares of JNJ. I think we'll have to wait for a broad market pullback for a good opportunity to emerge.

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  3. Hello,
    Unrelated to this specific post, but I had a question. Would you consider posting what you would be buying if you were continuing with your previous investment strategy? I know you are on hold for investments now, but I'm very curious as to what you would be doing if your schedule hadn't been interrupted. Thanks!

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    1. Anonymous: Due to my temporary suspension of new capital investment, I have not been doing much research on investment opportunities or keeping my watch list updated frequently, so I do not have a current list of potential stocks to share (sorry!). My main activity has been monitoring the existing stocks in my portfolio, taking note of the earnings reports that have been released recently.

      My general observation is that there are very few good dividend growth stock opportunities available right now. In a way, I am a bit relieved not to have to make tough decisions about where to invest new capital at the moment.

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  4. Hi DGI,

    This is really nice to see the div growth are in line with the planned strategy. Would be possible to add an extra row on the portfolio holding sheet to have something either the last div date and percentage increase or does it become more complicated?. In any case, i am 10 years older than you, but started following this div strategy for last 12 to 14 months, more interesting to watch and follow this, sure can't wait for a pull back for a better option to add more.

    One other question i had is except for 2008 were most of these companies in track to keep on raising the div payout in boom and bust cycles. The reason i ask is that, if we except this rate of growth, in 20 years can they even keep up with kind of payout?

    Thanks much, keep writing, can't wait for your monthly review here.

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    1. Anonymous: At one point I considered adding more information to the portfolio spreadsheet I post here, but I did not want it to get too complex. However, I have also thought about adding a separate spreadsheet somewhere that provides more detailed dividend information for each of my stocks, including the latest dividend increase. Maybe it is time I revisited that idea.

      Your question about future dividend growth is a good one. There will probably be a few companies in my portfolio that will not be able to sustain satisfactory dividend growth rates in 20 years. If a company's dividend growth becomes anemic for a while, then I would consider selling its stock. What is most important is that my portfolio as a whole maintains a good dividend growth rate, even if its constituents change over time. I view this as another aspect of portfolio management for a dividend growth investor.

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  5. What I really like about JNJ is the fact the dividend increases have accelerated the past few years. I became a shareholder of this fine company early 2011 and was somewhat disappointed with the 5% increase that year. The 2012 and 2013 boosts were more inline with my expectations. A 8% increase is fantastic! I don't know if the dividend will continue to accelerate, but I do hope we'll see increases around 7% or so for many years to come. If we do see 4 or 5% boosts I will not give up on this company, there is a lot of history here!

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    1. CI: I feel the same way -- increases in the 7-8% range from JNJ are satisfactory for me. It would be great if they can continue to do that for many more years.

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  6. DGM,

    Interested in your insights on JNJ. I have liked the business for a long time, I even owned it at one stage. But revenue growth looks fairly anemic right now, gross margins also appear to have been declining over the last few years and no real upward discernable trend in EPS is evident (at least based on the data that Morningstar has on its website). Its possible the data at a superficial level is a little misleading without digging deeper, but what's your view on the growth drivers for the company?

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    1. Integrator: Growth has indeed been anemic for the past few years, which is a bit disconcerting. Moreover, product recalls and lawsuits have been negative factors for a while. However, the company continues to have a strong financial position and a nicely diversified mix of businesses, and I think they're working to put some of these issues behind them. Their new CEO, Alex Gorsky, seems focused on improving the business and he played a major role in the recent acquisition of Synthes, which expands the company's presence in orthopedic devices. JNJ faces fewer patent losses over the next few years compared with its peers and it has a strong pipeline, particularly with new drugs for psoriasis, oncology, and cardiovascular disease. All told, I think the long-term outlook for JNJ is favorable, but it still faces some short-term challenges.

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