We recently published a list of 13 Best Healthcare Dividend Stocks to Invest in. In this article, we are going to take a look at where Johnson & Johnson (NYSE:JNJ) stands against other best healthcare dividend stocks to invest in.
The US healthcare sector has been at the forefront since the emergence of COVID-19 in 2020, leading to a significant transformation in the industry. The rise of telehealth, virtual consultations, and technological advancements has reshaped the way healthcare services are delivered.
Over the past two decades, the healthcare sector has expanded considerably in relation to the broader economy, as reflected in its growing share of gross domestic product (GDP). According to a report by CNBC, in 2003, healthcare spending made up 15.7% of US GDP, increasing by approximately 1.7 percentage points over the next decade to reach 17.4% in 2013. Today, it is estimated at around 18.4% of GDP, and projections from the Centers for Medicare & Medicaid Services suggest it could rise to 20% by 2030. This steady increase is driven by several factors, including rising demand for healthcare services, advancements in medical technology, and escalating costs. The aging population, particularly as baby boomers retire, has significantly increased the need for medical care, while longer life expectancies have resulted in prolonged healthcare utilization. In addition, the prevalence of chronic conditions such as diabetes, cardiovascular diseases, and obesity has contributed to rising costs. The latest breakthroughs in diagnostics, treatments, and pharmaceuticals—though beneficial—often come with higher expenses, further fueling the sector’s expansion.
The healthcare industry’s share of the overall economy has expanded, with healthcare companies experiencing faster revenue growth than the broader market in the past five years. During this period, healthcare sector revenues have increased by nearly 61%, compared to just over 38% growth for the broader market as a whole, as reported by CNBC. However, despite this strong revenue performance, the healthcare sector has lagged behind the broader market index, which has been driven by the rapid expansion of the technology sector.
The healthcare sector faced a turbulent year in 2024. During the first half, investors gravitated toward industries such as technology and communication services, particularly those linked to the growing influence of AI, leaving healthcare stocks trailing behind. However, as the market rally broadened in the second half of the year, healthcare stocks saw some recovery, though certain segments continued to struggle with lingering supply-and-demand imbalances from the pandemic. Beyond these challenges, fundamental issues and policy uncertainties created additional obstacles for parts of the sector. While some regulatory pressures may ease with the incoming administration, others—such as drug pricing concerns—are expected to remain a persistent issue.
On a positive note, innovation remained robust throughout the year. Biotech companies delivered a series of encouraging clinical updates while growing enthusiasm for new treatments targeting obesity and diabetes contributed to an increase in pharmaceutical firms’ market valuations. A Fidelity report suggested that the healthcare sector is well-positioned for growth in 2025. The industry benefits from strengthening business fundamentals, such as rising cash flows, and encompasses a diverse range of segments that offer a blend of defensive stability and growth potential, making it appealing across different market conditions.
The healthcare sector is also attracting attention due to its rising dividend payouts. In the third quarter of 2024, total dividends distributed by the global healthcare industry reached $25.7 billion, up from $18.7 billion in Q3 2018, reflecting steady growth in shareholder returns, according to a report by Janus Henderson.
Our Methodology
For this list, we scanned Insider Monkey’s database of Q4 2024 and picked healthcare dividend companies. From that list, we chose healthcare stocks with a strong track record of paying dividends to shareholders, which makes them resilient in the current environment. The stocks are ranked in ascending order of the hedge fund investors owning stakes in them, according to Insider Monkey’s database 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 one of the most prominent healthcare companies globally. The company, through its subsidiaries, develops, manufactures, and sells a diverse range of healthcare products, with a strong emphasis on human health and well-being. It operates through two main segments: Innovative Medicine and MedTech. Over the past 15 years, it has reinforced its market position by focusing on brand-name drug development. Following the 2023 spinoff of its consumer health business, Kenvue, the Innovative Medicine segment now accounts for nearly two-thirds of total revenue. While brand-name drugs have a limited window of market exclusivity, their strong pricing power and high-profit margins remain key drivers of profitability.
In the fourth quarter of 2024, Johnson & Johnson (NYSE:JNJ) reported $22.5 billion in revenue, reflecting a 5.2% year-over-year increase. As a leading healthcare company, it continues to prioritize addressing critical medical needs, including multiple myeloma, lung cancer, inflammatory bowel disease, and heart failure.
Johnson & Johnson (NYSE:JNJ) MedTech segment saw global operational sales grow by 6.2%, with acquisitions and divestitures contributing 1.5% to this increase. The Cardiovascular division benefited from strong demand for electrophysiology products and Abiomed, while the General Surgery segment experienced growth driven by higher sales of wound closure products.
Johnson & Johnson (NYSE:JNJ) holds one of the longest dividend growth track records in the market, spanning over 62 years. The company offers a quarterly dividend of $1.24 per share and has a dividend yield of 3.04%, as recorded on March 20.
Overall, JNJ ranks 4th on our list of best healthcare dividend stocks to invest in. 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.
