We recently compiled a list of the 13 Highest Yielding Dividend Stocks in the Dow. In this article, we are going to take a look at where Johnson & Johnson (NYSE:JNJ) stands against the other high yield dividend stocks.
Dow is one of the most well-known and influential stock market indices globally. It monitors the performance of 30 publicly traded companies on US stock exchanges, covering a broad array of industries. In the past 12 months, the index has surged by over 15%, compared with a nearly 25% return of the broader market.
Today, tech stocks have dominated the market, as seen by the NASDAQ’s nearly 30% gain over the past year, outperforming both the DJIA and the broader market. However, the Index’s underperformance in this period contrasts with its historical performance. A report from Barron’s highlighted that in 1978, 1980, and 1992, the index outpaced the Nasdaq by at least seven percentage points. The most notable period of its dominance occurred during the dot-com bubble’s collapse, with 12 instances of outperformance between 1999 and 2002.
When comparing the Dow to the broader market, it has also shown strong results. According to S&P Global, from the past 30 years up until June 2021, the market returned 10.6%, while the index slightly exceeded that with an 11.16% return. This outperformance is largely due to the Dow’s stable, industry-leading companies that offer reliable dividends and steady yields.
Investing in high-yielding Dow Jones stocks can be an appealing strategy for those seeking reliable income and potentially higher returns. When selecting dividend stocks for their portfolios, investors often focus on dividend yields. However, it’s important to recognize that companies with high yields but lacking financial stability may be at risk of cutting dividends, especially amid global economic challenges and rising interest rates. Therefore, investment strategies that target high yields should also emphasize the financial strength and stability of the companies involved.
The Dow Jones Dividend 100 Index tracks the performance of 100 high-dividend stocks selected for their reliable dividend payments and strong financial fundamentals. In any income-focused strategy, investors typically aim for both yield and capital appreciation. The dividend index have consistently provided higher yields and comparable capital gains over the long term when compared to their benchmarks. According to S&P Dow Jones Indices, between June 30, 2001, and June 30, 2023, the total return of the index, assuming dividends were reinvested, averaged 11.7% annually, outperforming its US Broad Stock Market Index, which returned 10.2% during the same period.
When evaluating dividend yields, many investors adopt the ‘Dogs of the Dow’ strategy, which involves picking the ten stocks from the index with the highest dividend yields. While this strategy hasn’t performed well in recent years, it has historically outpaced its benchmark over the long term. Michael O’Higgins discovered that, over a 26-year period, a hypothetical portfolio of high-dividend stocks in the index achieved an annualized return of 17.9%. This performance outperformed its benchmark’s annualized return of 13% during the same period. According to the Wall Street Journal, the investment strategy outperformed the DJIA in 2022 for the first time since 2018. This happened as investors turned to safer options amidst the market’s unpredictable swings. Given this, we will take a look at some of the highest yielding dividend stocks in the Dow.
Our Methodology:
For this article, we examined the companies within the Dow Jones index and identified 13 stocks with the highest dividend yields as of January 16. It’s worth noting that the majority of companies in the Dow Jones are dividend payers. We also considered hedge fund sentiment around each stock using Insider Monkey’s data for Q3 2024.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here).
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Johnson & Johnson (NYSE:JNJ)
Dividend Yield as of January 16: 3.36%
Johnson & Johnson (NYSE:JNJ) is an American pharmaceutical company, based in New Jersey. The company specializes in a wide range of biotech and medical products and offers related services to consumers. It reported strong third-quarter 2024 earnings, with revenue reaching $22.4 billion, a 5.25% increase from the same quarter last year. Over the first nine months, the company generated $14 billion in free cash flow, up from $11.9 billion the previous year. Following its improved performance and the recent acquisition of V-Wave, the company has updated its 2024 outlook, including adjusted operational earnings per share (EPS). The company now expects adjusted operational sales growth between 5.7% and 6.2%, with a midpoint of 6.0%.
Johnson & Johnson (NYSE:JNJ) is drawing attention for its continued innovation and recent acquisitions. It recently unveiled plans to invest more than $14 billion to enhance its focus on central nervous system disorders by acquiring Intra-Cellular Therapies. The company stated that the deal would be funded through a combination of cash reserves and debt and is anticipated to close later this year. This acquisition represents the largest biotech deal in over a year, signaling a revival in healthcare mergers and acquisitions after a slowdown in 2024 when major pharmaceutical firms took time to integrate previous post-pandemic acquisitions.
Johnson & Johnson (NYSE:JNJ)’s dividend history has also attracted investors over the years. The company has been rewarding shareholders with growing dividends for the past 62 years. Currently, it pays a quarterly dividend of $1.24 per share and has a dividend yield of 3.36%, as of January 16.
As of the end of Q3 2024, 81 hedge funds in Insider Monkey’s database held stakes in Johnson & Johnson (NYSE:JNJ), growing from 80 in the previous quarter. These stakes are worth over $5.4 billion in total.
Overall JNJ ranks 4th on our list of the highest yielding dividend stocks in the Dow. While we acknowledge the potential for JNJ as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than JNJ but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.