Despite an increased share price volatility and several noticeable pullbacks, Johnson & Johnson (NYSE:JNJ) continues beating earnings expectations. This has enabled it to produce an asset appreciation of more than 46% over the last five years.
In addition to robust long-term capital gains, Johnson & Johnson continues to support its asset appreciation with a steady flow of dividend income payouts that have grown every year for more than five decades. While the share price is still a below the level that it achieved one year earlier, the dividend distributions over the past year have offset that small shortfall and prevented the company from delivering a total loss over the trailing 12-month period to the company’s shareholders.
Driven by the share price’s increased volatility, the 50-day moving average crisscrossed its 200-day counterpart several times over the past year. However, a short uptrend since the beginning of September 2019 has pushed the current share price virtually even with the 200-day moving average. Additionally, the 50-day average has levelled off its recent decline and could begin rising if the current share price uptrend continues.
The key driver of any long-term asset appreciation trend is delivering earnings that consistently exceed the expectations of Wall Street analysts. In that regard, Johnson & Johnson did not disappoint. Before the beginning of trading on October 15, 2019, Johnson & Johnson reported positive results for third-quarter 2019.
For the third quarter, the company reported a 1.9% sales increase from $20.35 billion in the same period last year to $20.73 billion. Net earnings advanced nearly 23% year-over-year from $3.9 billion to $4.8 billion, or from $1.44 to $1.81 per diluted share. While the net earnings growth seems impressive, the company’s adjusted figures offer better comparison of its performance when compared to the same period last year.
On an adjusted basis, net earnings advanced 1.5% from $5.59 billion to $5.67 billion. However, because the company’s share buyback program reduced the number of outstanding shares, adjusted earnings per share (EPS) increased 3.4% from $2.05 to $2.12. Furthermore, the current adjusted EPS of $2.12 beat analysts’ earnings expectations by 5.5%
As one of only 57 Dividend Aristocrat companies, Johnson & Johnson has a long history of boosting its annual dividend payout amount. The company’s current $0.95 quarterly distribution is equivalent to a $3.80 annual distribution and yields nearly 3%, which is higher than the company’s own 2.7% average yield over the last five years.
Just over the past decade, Johnson & Johnson has doubled its annual dividend payout amount. Over the last five years, the company has maintained an average dividend growth rate of 6.35% per year.
While this is nearly 50% higher than the average dividend yield of the overall markets, JNJ’s current yield is more than five times above the average yield of the entire Health Care sector. Additionally, JNJ’s current yield is also more than 80% above the 1.6% simple average yield of the company’s peers in the Major Drug Manufacturers industry segment.
Investors who are interested in collecting dividend income payouts from Johnson & Johnson, must claim stock ownership before the company’s next ex-dividend date in late November. Based on JNJ’s dividend schedule over the past few years, the company should declare the exact ex-dividend date and the pay date as early as later this week or next week at the latest.
While gaining 30% over the past five years, the share price has experienced significant volatility over the trailing 12 months. Amid the overall market correction in late 2018, the share price fell nearly 17% in December. After hitting its 52-week low of $122.84 on December 24, 2018, the share price reversed direction and began rising. By late June 2019, the share had recovered almost all of its recent losses and came to within 3% of the 52-week high from early December 2018.
However, following another direction reversal, the share price gave back nearly all of those gains over the subsequent 60 days. After reversing its direction yet again in early September, the share price assumed its current uptrend and returned back to its level from one year earlier to close on October 14, 2019, at $130.72. This closing price was just 0.2% lower than it was a year ago and nearly 9% above the 52-week low from December 2018. Following the positive earnings report before the opening bell on October 15, the share price surged more than 2% initially and has been trading in the $133 to $134 range as of this writing at 1 p.m.
Even with the flat share price as of closing on October 14, the dividend income has been able to offset the minor shortfall in order to deliver a marginal total gain of 0.4% over the trailing 12 months. However, if the current share price gain holds until closing, the total gains for the 12-month period would surge to nearly 2.5%.
The prospect of the current uptrend’s potential to continue and a steadily rising dividend income payouts could entice some investors to consider taking a long position in Johnson & Johnson’s stock. An extended period of asset appreciation could take the stock’s total returns back to levels similar to the 20%-plus return over the past three years and total returns of more than 52% over the last five years.
Johnson & Johnson (NYSE:JNJ)
Founded in 1885 and headquartered in New Brunswick, New Jersey, Johnson & Johnson researches, develops, manufactures and sells health care products worldwide. The company operates through three segments: Consumer, Pharmaceutical and Medical Devices. The Consumer segment offers baby care, oral care, women’s health products and beauty products under multiple brands, which include Johnson’s, Listerine, Clean & Clear, Stayfree, Carefree, Band-Aid, Neosporin, Neutrogena and more. Additionally, the company manufactures and distributes Tylenol, Sudafed, Benadryl, Zyrtec, Motrin IB, Pepcid and other over-the-counter medicines. Through its Pharmaceutical segment, the company offers various products in the areas of immunology, infectious diseases and vaccines, neuroscience, oncology, cardiovascular and metabolic diseases. The Medical Devices segment provides orthopedic, general surgery, sterilization and disinfection and electrophysiology products, as well as disposable contact lenses.
Ned Piplovic is the assistant editor of website content at Eagle Financial Publications. He graduated from Columbia University with a Bachelor’s degree in Economics and Philosophy. Prior to joining Eagle, Ned spent 15 years in corporate operations and financial management. Ned writes for www.DividendInvestor.com and www.StockInvestor.com.