3 Reasons To Own This Blue-Chip Dividend King: Johnson & Johnson (JNJ)

There are thousands of stocks out there you can buy at any given time. While some might find that overwhelming, I find that exciting. It’s a giant world of opportunity out there.

However, of the thousands of stocks out there, there are less than 70 Dividend Aristocrats.

Dividend Aristocrats are stocks that have increased their dividends every year for at least the last 25 consecutive years. Why are there so few of these stocks?

Because it’s incredibly difficult to consistently rake in the ever-higher profits necessary to consistently pay out ever-higher dividends. You have to run an incredible business in order to be able to do something like that.

This is why Dividend Aristocrats can be thought of as the creme-de-la-creme of stocks. And within the Dividend Aristocrats, you have a few ultra-high-quality stocks known as Dividend Kings.

These are stocks that have been increasing their dividends each year for at least the last 50 consecutive years.

There’s one Dividend King that I think is especially worthy of your attention, if not your money. Today, I want to give you three reasons to own one blue-chip Dividend King in particular. Ready? Let’s dig in.

The blue-chip Dividend King I’m talking about today is Johnson & Johnson (JNJ).

Johnson & Johnson is a multinational healthcare conglomerate with a market cap of $453 billion.

The first reason to own Johnson & Johnson is because of its stellar dividend. It’s basically a prototypical dividend growth stock. The track record speaks for itself.

Johnson & Johnson has increased its dividend for an astounding 59 consecutive years.

Just think about starting your own business and getting investors to pony up capital. Now imagine these investors expect cash payouts every quarter, in perpetuity. Not only that, they want these quarterly cash payouts to get bigger every single year, no matter what. You have to be running an incredible business, and you have to be running it incredibly well, in order to accomplish something like that.

This time period stretches through wars, recessions, political upheaval, societal change, and even a global pandemic.

None of that has shaken Johnson & Johnson. The dividend kept on growing straight through. And with a 10-year dividend growth rate of 6.5%, you’re seeing your purchasing power rise over time as your passive income growth exceeds the rate of inflation. Plus, the stock yields a respectable 2.5%, which is about twice as high as what the broader market offers and within 10 basis points of the stock’s own five-year average yield. And with the dividend only sucking up 44.4% of the midpoint of this fiscal year’s adjusted EPS, this is a well-covered dividend that’s set to grow, like clockwork, for years and years to come.

The second reason to own Johnson & Johnson is because of its quality.

This is one of the highest-quality businesses on the planet. It basically oozes quality from every single pore.

No matter where you look, the quality is there. Consistent top-line and bottom-line growth over the last decade? Check. Regular buybacks to reduce the float and increase each remaining shareholder’s interest in the business? Check. How about net margin in the 20% range? Check. Return on equity near 25%? Check. And get this.

Johnson & Johnson is one of only two companies with a AAA credit rating from Standard & Poor’s.

That’s a higher credit rating than the US government. You know, the government that can print money. To say that Johnson & Johnson has a pristine balance sheet is underselling it. And while this company won’t knock you dead with big growth in the same way that some young business will, the consistency of their growth is something that allows shareholders to sleep very well at night with.

You just know that Johnson & Johnson is going to consistently grow its profit at a mid-single- to high-single-digit rate, every single year.

It’s the kind of business that takes a licking and keeps on ticking. I’ve owned Johnson & Johnson shares for more than 10 years now. And you know what? I’ve never once been disappointed by some earnings report that showed them totally waffling. It’s been said that successful investing should be like watching paint dry. Well, owning Johnson & Johnson is a lot like that. It’s so boring but also so reassuring.

The third reason to own Johnson & Johnson is because of its durability.

In what world does Johnson & Johnson not do well for years to come?

I can’t think of any reality in which this business fails. It’s one of the biggest and most diversified healthcare companies on the planet. And we all know that the world is growing bigger, older, and richer. What does that mean?

It means more people demanding more access to quality healthcare.

Johnson & Johnson serves global healthcare from three angles through three different business segments. They have pharmaceuticals, medical devices, and consumer products. There is no future in which a bigger, older, and richer world will demand less of any of this. Meantime, even if one area of healthcare is taking a temporary hit for some reason, Johnson & Johnson has the other healthcare areas of the company to keep the ship floating along just fine. This has created a nearly bulletproof amount of business durability. Want evidence of that?

During the pandemic, all Johnson & Johnson managed to do was produce record sales and increase its dividend.

According to The Wall Street Journal an extra 200,000 businesses in the US closed during the first year of the pandemic. My heart goes out to all of those business owners. However, Johnson & Johnson, on the other hand, produced more revenue than ever before in 2020. And they increased their dividend by 6.3% in April 2020 – during the throes of the outbreak – which is precisely what you’d expect with their historical results. With a forward P/E ratio of 18, based on the midpoint guidance for this fiscal year’s adjusted EPS, the valuation is quite reasonable. If you want a blue-chip Dividend King that features a stellar dividend, super high quality, and exceptional durability, Johnson & Johnson should be at the top of your list.

— Jason Fieber

P.S. If you’d like access to my entire six-figure dividend growth stock portfolio, as well as stock trades I make with my own money, I’ve made all of that available exclusively through Patreon.