We recently published a list of the 13 Best American Dividend Stocks to Buy According to Analysts. In this article, we are going to take a look at where Johnson & Johnson (NYSE:JNJ) stands against other best American dividend stocks.
Dividend-paying stocks have long benefited investors by delivering consistent and solid returns. During periods of economic uncertainty, they’ve generally performed more reliably than many other types of investments. Because of these qualities, more investors are turning to dividend stocks to take advantage of their compounding potential. This growing optimism has also encouraged several companies to join the dividend club, which was evident in the way tech firms eagerly began issuing dividends in 2024.
According to a report by S&P Dow Jones Indices, dividends paid by the S&P companies reached a new high of $167.6 billion in the fourth quarter of 2024, marking a 6.7% increase from the previous quarter’s $157.0 billion—which itself had set a record. This also represented an 8.7% rise compared to the $154.1 billion paid out in Q4 2023. For the full year, total dividend payments hit an all-time high of $629.6 billion in 2024, up 7.0% from the $588.2 billion distributed in 2023. The report further mentioned that the indicated dividends for the top 20 companies in the S&P index amounted to over $141 billion.
Howard Silverblatt, Senior Index Analyst at S&P Dow Jones Indices, made the following comment about dividends:
“Under an increased tax, some of the expenditures may shift from buybacks to dividends. However, any shift was not seen as being on a dollar-for-dollar basis as dividends remain a long-term pure cash-flow item which must be incorporated into corporate budgets.”
Dividends have played a key role in driving overall returns from equity investments over the long haul. This was emphasized in a study by London-based Guinness Global Investors, which examined the broader market’s performance dating back to 1940. According to their analysis, dividends and reinvested payouts made up about 94% of the index’s total return during that time. To put it in perspective, a $100 investment made at the end of 1940 would have grown to roughly $525,000 by the end of 2019 if dividends were reinvested, compared to just $30,000 if the dividends had simply been taken as cash.
The report also pointed out that dividends become a more significant part of total returns the longer an investment is held. Since 1940, for the broader market, dividends have made up about 27% of total returns over a typical one-year holding period. Stretching that to three years, their contribution rises to 36%. Over five years, it climbs to 40%, and over ten years, it reaches 47%. For investors who hold their positions for twenty years, dividends end up accounting for around 57% of the total returns. Due to this performance, analysts also recommend investing in dividend stocks.
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Our Methodology:
We created this list by scanning Insider Monkey’s Q4 2024 database for US companies that have strong dividend policies and are traded on American stock exchanges. From that group, we further refined our selection criteria by identifying stocks with a projected upside potential of over 5% based on analyst price targets, as of April 20. The stocks are ranked according to their upside potential.
At Insider Monkey, we are obsessed with hedge funds. 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 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
Johnson & Johnson (NYSE:JNJ)
Upside Potential as of April 20: 7.53%
Johnson & Johnson (NYSE:JNJ) ranks eleventh on our list of the best dividend stocks according to analysts, with an upside potential of over 7%. The American multinational healthcare company recently reported earnings for Q1 2025. The company posted revenue of $21.9 billion, which showed a 2.4% growth from the same period last year. The revenue also beat analysts’ estimates by $315.6 million. Its net earnings of $11 billion showed a significant growth of 238% on a YoY basis.
During the quarter, Johnson & Johnson (NYSE:JNJ) strengthened its reputation as a leader in innovation by making significant progress across its development pipeline. This included advancements with TREMFYA in inflammatory bowel disease, the combination of RYBREVANT and LAZCLUZE for non-small-cell lung cancer, and OTTAVA, its robotic system for soft tissue surgery. Additionally, the firm bolstered its neuroscience portfolio through the completed acquisition of Intra-Cellular Therapies.
Johnson & Johnson (NYSE:JNJ) also reported a strong cash position. In the most recent quarter, the company’s free cash flow came in at $3.4 billion, up from $2.8 billion in the prior-year period. On April 15, it declared a 4.8% hike in its quarterly dividend to $1.30 per share. This marked the company’s 63rd consecutive year of dividend growth. The stock supports a dividend yield of 3.30%, as of April 20.
Overall, JNJ ranks 11th on our list of the best American dividend stocks according to analysts. While we acknowledge the potential of JNJ as an investment, our conviction lies in the belief that some deeply undervalued dividend stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for a deeply undervalued dividend stock that is more promising than JNJ but that trades at 10 times its earnings and grows its earnings at double digit rates annually, check out our report about the dirt cheap dividend stock.
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Disclosure: None. This article is originally published at Insider Monkey.