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The board of Johnson & Johnson (NYSE:JNJ) has announced that the dividend on 10th of June will be increased to $1.30, which will be 4.8% higher than last year's payment of $1.24 which covered the same period. This will take the dividend yield to an attractive 3.2%, providing a nice boost to shareholder returns.
Johnson & Johnson's Projected Earnings Seem Likely To Cover Future Distributions
If the payments aren't sustainable, a high yield for a few years won't matter that much. Prior to this announcement, Johnson & Johnson's dividend was comfortably covered by both cash flow and earnings. This means that a large portion of its earnings are being retained to grow the business.
Over the next year, EPS is forecast to expand by 4.7%. If the dividend continues along recent trends, we estimate the payout ratio will be 56%, which is in the range that makes us comfortable with the sustainability of the dividend.
Check out our latest analysis for Johnson & Johnson
Johnson & Johnson Has A Solid Track Record
The company has an extended history of paying stable dividends. The dividend has gone from an annual total of $2.80 in 2015 to the most recent total annual payment of $4.96. This means that it has been growing its distributions at 5.9% per annum over that time. Dividends have grown at a reasonable rate over this period, and without any major cuts in the payment over time, we think this is an attractive combination as it provides a nice boost to shareholder returns.
We Could See Johnson & Johnson's Dividend Growing
Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. We are encouraged to see that Johnson & Johnson has grown earnings per share at 6.8% per year over the past five years. The company is paying a reasonable amount of earnings to shareholders, and is growing earnings at a decent rate so we think it could be a decent dividend stock.
We Really Like Johnson & Johnson's Dividend
Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. Earnings are easily covering distributions, and the company is generating plenty of cash. All in all, this checks a lot of the boxes we look for when choosing an income stock.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Earnings growth generally bodes well for the future value of company dividend payments. See if the 20 Johnson & Johnson analysts we track are forecasting continued growth with our free report on analyst estimates for the company. Is Johnson & Johnson not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.