We recently compiled a list of the 10 Best Dividend Aristocrat Stocks To Buy Right Now. In this article, we are going to take a look at where Johnson & Johnson (NYSE:JNJ) stands against the other dividend aristocrat stocks.
Investors usually buy stocks with the expectation that their value will increase as the company grows more profitable. However, stocks can offer additional advantages. As businesses succeed and mature, they often choose to distribute a portion of their profits to shareholders as cash dividends. Even more appealing are companies that not only pay dividends but consistently increase them year after year. These stocks have delivered impressive performance over time compared to other asset classes.
According to a report by Thornburg Investment Management, from 1990 to 2023, bond yields, represented by the Bloomberg U.S. Aggregate Bond Index, fell significantly from nearly 9% to 3.41%. Similarly, equity yields, reflected by the dividend payouts on the Dividend Aristocrats Index, declined from just over 3% to 2.42% during the same period. The Dividend Aristocrats Index tracks large-cap, blue-chip US companies within the broader market that have consistently increased their dividends for at least 25 consecutive years. The report further mentioned that dividend-paying stocks can not only offer a source of current income with the potential for growth over time but also help investors bring greater stability to their portfolios in the long run. The report cited Bloomberg’s data and highlighted that dividend aristocrats delivered an 11.63% return to shareholders between 1990 to 2023, compared with a 10.2% return for the broader market.
Excluding the aristocrat factor from dividend stocks highlights their significance in overall market returns. A report by S&P Dow Jones Indices reveals that since 1926, dividends have accounted for roughly 32% of the broader market’s total returns, with the remaining 68% coming from capital appreciation. This demonstrates that both steady dividend income and the potential for capital growth play crucial roles in shaping total return expectations. The report also highlighted the significant impact of compounding when it comes to dividends. Without dividends, the market’s return from January 1, 1930, to the end of July 2023 would have grown to 214%. However, if dividends had been reinvested during the same period, the return would have reached an impressive 7,219%.
Also read: 8 Magnificent Dividend Growth Stocks to Buy Now
The dividend aristocrat index has delivered a 12.5% return since the start of 2024, underperforming the broader market that has returned nearly 27%. Although dividend stocks have lagged in performance this year, companies continue to increase their payouts, reflecting investor preferences steadily. According to a recent report from S&P Dow Jones Indices, 480 dividend increases were recorded in Q3 2024, compared to 448 in Q3 2023, representing a 7.1% year-over-year growth. The total value of these increases for the quarter reached $14.1 billion. Over the past 12 months, dividend increases amounted to $74.7 billion, up from $63.9 billion in the previous year.
Our Methodology:
For this article, we first listed down all dividend aristocrat stocks — the companies with 25+ years of consecutive dividend increases. From that list, we picked 10 stocks with the highest number of hedge fund investors and ranked them in ascending order of hedge funds’ sentiment towards them, as per Insider Monkey’s Q3 2024 database.
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).
A smiling baby with an array of baby care products in the foreground.
Johnson & Johnson (NYSE:JNJ)
Number of Hedge Fund Holders: 81
Johnson & Johnson (NYSE:JNJ) is a New Jersey-based pharmaceutical company that specializes in a wide range of biotech and medical products and offers related services to consumers. The company has steadily expanded its portfolio through multiple acquisitions. Recently, it acquired the medical device company V-Wave for an upfront payment of $600 million. The deal also includes additional milestone payments of up to $1.1 billion, contingent on regulatory approvals and commercial successes. The stock has surged by over 3% in the past 12 months.
Johnson & Johnson (NYSE:JNJ) reported strong earnings in the third quarter of 2024. The company posted revenue of $22.4 billion, up 5.25% from the same period last year. The revenue also beat analysts’ estimates by $299.7 million. The company’s cash position was also very strong with year-to-date free cash flow amounting to approximately $14 billion, up from $11.9 billion in the prior-year period.
Johnson & Johnson (NYSE:JNJ), one of the best dividend aristocrat stocks, currently offers a quarterly dividend of $1.24 per share. The company has been rewarding shareholders with growing dividends for the past 62 consecutive years. The stock supports a dividend yield of 3.18%, as of November 25.
As of the close of Q3 2024, 81 hedge funds tracked by Insider Monkey held stakes in Johnson & Johnson (NYSE:JNJ), up from 80 in the previous quarter. The total value of these stakes is more than $5.4 billion. Fisher Asset Management owned the largest stake in the company, worth over $1.22 billion.
Overall JNJ ranks 4th on our list of the best dividend aristocrat stocks to buy. 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 timeframe. 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.
READ NEXT: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock.
Disclosure: None. This article is originally published at Insider Monkey.
