We recently published a list of 10 Best DRIP Stocks To Own Now. In this article, we are going to take a look at where Johnson & Johnson (NYSE:JNJ) stands against other best DRIP stocks to own now.
Dividend investing is often regarded as a strategy that rewards patience, as it tends to generate stronger returns over the long term. Those who commit to holding their investments for extended periods are typically the ones who reap the greatest benefits. A major factor behind the success of this approach is the power of compounding. By reinvesting dividends—using those payouts to purchase additional shares—investors can enhance the growth of their portfolios. Rather than taking the dividends as cash, reinvesting them allows for a steady increase in share ownership, amplifying potential returns. Over time, this method has proven to be highly effective. In fact, a report from Hartford Funds highlights that since 1960, reinvested dividends and compounding have accounted for 69% of the broader market’s total return.
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Over the years, analysts have closely monitored the impact of dividend reinvestment and have expressed favorable opinions about its benefits. Steven Greiner, Managing Director of Schwab Equity Ratings at the Schwab Center for Financial Research, supports this approach. He shares the following insight:
“Reinvesting dividends is nearly effortless. Once you set it up—which generally involves simply ticking a box—there’s nothing more to do but sit back and let compounding work its magic. Be aware, however, that companies can reduce or stop paying dividends.”
Steven Greiner’s final point touches on a key concern for dividend investors—the risk of a company suddenly cutting or suspending its dividend payments. No investor wants to be caught in that situation. While many tend to measure success primarily by stock price appreciation, a deeper analysis offers a broader perspective. A study of major global indexes over a 25-year period, ending in March 2018, found that reinvested dividends contributed nearly 3% in additional growth, as reported by Forbes. This underscores the vital role that dividends play in enhancing investment returns beyond just price gains. It serves as a strong reminder that evaluating an investment solely based on stock price movements may offer an incomplete picture. By incorporating dividend reinvestment into the assessment, investors gain a more comprehensive and accurate view of overall performance.
A separate analysis from T. Rowe Price found that over the three decades leading up to 2022, reinvested dividends played a crucial role in market returns, contributing a notable 42.5% to overall gains. The report also emphasized that dividend reinvestment had an even greater impact on a select group of high-performing companies—those that consistently increase their dividends at a rate exceeding the broader market. This effect becomes more powerful over time, as reinvesting a steadily growing dividend further accelerates long-term investment returns.
For long-term investors looking for steady returns, focusing on stocks with strong dividend growth can be a strategic approach. Reinvesting dividends from these stocks allows investors to gradually increase their holdings, leveraging the power of compounding to boost overall returns and steadily grow their wealth.
Our Methodology
To compile this list, we looked through Insider Monkey’s database of over 1,000 hedge funds as of Q4 2024. We specifically chose dividend stocks that provide a dividend reinvestment plan (DRIP) to shareholders. After filtering, we narrowed down the selection to companies with robust and consistent dividend track records. The stocks are ranked in ascending order of the number of hedge funds having stakes in them, as of Q4 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 373.4% since May 2014, beating its benchmark by 218 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: 98
Johnson & Johnson (NYSE:JNJ) is an American multinational 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 remains a dominant force across all major healthcare sectors, maintaining a strong competitive edge through robust cash flow, a growing research pipeline, and diverse revenue streams.
In its Q4 2024 earnings report, Johnson & Johnson (NYSE:JNJ) posted $22.5 billion in revenue, marking a 5.2% year-over-year increase. As a leader in healthcare, it continues to advance treatment options for conditions with significant unmet needs, including multiple myeloma, lung cancer, inflammatory bowel disease, and heart failure. The MedTech segment saw a 6.2% increase in global operational sales, with acquisitions and divestitures contributing 1.5% to the growth. The Cardiovascular division benefited from strong demand for electrophysiology products and Abiomed, while the General Surgery segment grew due to increased sales of wound closure products.
Johnson & Johnson (NYSE:JNJ) is reinforcing its commitment to innovation and growth through strategic acquisitions. The company has announced plans to invest more than $14 billion in acquiring Intra-Cellular Therapies, strengthening its focus on treatments for central nervous system disorders. The deal will be financed using a mix of cash reserves and debt, with completion expected later this year. This represents the largest biotech acquisition in over a year, signaling a renewed wave of healthcare mergers and acquisitions after a slower 2024 when major pharmaceutical firms prioritized integrating their previous post-pandemic acquisitions.
Johnson & Johnson (NYSE:JNJ) is one of the best DRIP stocks on our list with 62 consecutive years of dividend growth under its belt. The company’s quarterly dividend comes in at $1.24 per share for a dividend yield of 3.06%, as of February 23.
Overall, JNJ ranks 3rd on our list of best DRIP stocks to own now. 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.