We recently published a list of 10 Best Dividend Kings Stocks to Invest in Now. In this article, we are going to take a look at where Johnson & Johnson (NYSE:JNJ) stands against other best dividend king stocks to invest in now.
Investing in dividend stocks has been a focal point for investors for several years. The attractive income generated from these stocks motivates many to invest. Among these, dividend growth stocks stand out, as they offer the potential for increasing income over time, which is highly appealing. In the US, numerous companies have consistently raised their dividends for over five decades, earning them the prestigious title of Dividend Kings.
Analysts have long supported dividend stocks due to their historically robust performance. Kirsten Cabacungan, an investment strategist at Merrill and Bank of America Private Bank, has highlighted several reasons to consider investing in these stocks. She pointed out that the income generated by dividend stocks can assist investors in meeting their liquidity needs. In addition, dividend-focused investments have shown a tendency to reduce volatility and mitigate losses during market downturns. Cabacungan particularly emphasizes the value of dividend growth stocks in this context. Here are some comments from the analyst:
“Companies that have consistently increased their dividends tend to be more stable, higher-quality businesses, which historically have weathered downturns and are more likely to have the ability to pay dividends consistently.”
In 2024, dividend stocks lagged behind the broader market, but their future remains promising. Analysts are optimistic about a rebound, as cash flow remains a key priority for investors. Capital Group has advised looking for opportunities in overlooked dividend-paying companies, such as pharmaceutical firms overshadowed by the focus on weight loss treatments, as well as utilities and select banks. In addition, dividend growth stocks with substantial yields continue to attract interest. Companies offering dividends alongside strong balance sheets and appealing yields can deliver steady income, cushion against market downturns, and foster solid investment growth. A report from ProShares noted that the Dividend Aristocrats Index has historically outperformed the broader market with less volatility. For example, a $10,000 investment in May 2005 could have grown to more than $61,000 by March 2023.
Also read: 12 Most Reliable Dividend Stocks To Buy According to Hedge Funds
Investor preferences have led many US companies to increase and sustain their dividends in 2024. Financial experts anticipate continued dividend growth in 2025. Howard Silverblatt, a senior index analyst at S&P Dow Jones Indices, predicts an average dividend increase of around 8% for the current year. He expects another record payout in 2025, estimated at approximately $685 billion, compared to the projected $630 billion for 2024. Silverblatt attributes this growth to record earnings, anticipated future earnings, declining interest rates, strong employment, and overall economic growth.
In addition, the broader market’s dividend yield has recently hit a 20-year low, dipping below 1.19%, well below the long-term average of 4.3%. As interest rates rise on risk-free options like Treasuries, companies are increasingly aware of the competition for yield. In response, many are boosting their dividends or starting to offer them for the first time. Notably, several major tech firms began paying dividends in 2024, indicating their intention to position themselves as value investments within the traditionally high-growth tech sector. Given this, we will take a look at some of the best dividend kings to invest in.
Our Methodology:
For this list, we reviewed the Dividend Kings companies and selected the ten stocks that were most favored by hedge funds in the third quarter of 2024, using data from Insider Monkey’s database. The stocks are ranked by the number of hedge fund investments, starting with the lowest.
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 is gaining attention for its ongoing innovation and recent acquisitions. It recently announced plans to invest over $14 billion to expand its focus on treating central nervous system disorders through the acquisition of Intra-Cellular Therapies. The deal will be financed with a mix of cash reserves and debt, according to J&J, and is expected to be finalized later this year. This transaction marks the largest biotech deal in over a year, highlighting a resurgence in healthcare mergers and acquisitions following a slowdown in 2024 when major pharmaceutical companies paused to integrate previous post-pandemic acquisitions.
Johnson & Johnson (NYSE:JNJ) posted strong third-quarter 2024 earnings, reporting $22.4 billion in revenue, a 5.25% increase compared to the same period last year. The company generated $14 billion in free cash flow during the first nine months of the year, up from $11.9 billion in the previous year. It has revised its 2024 outlook, including adjusted operational earnings per share (EPS), to account for its improved performance and the recent acquisition of V-Wave. The company now anticipates adjusted operational sales growth of 5.7% to 6.2%, with a midpoint target of 6.0%.
Johnson & Johnson (NYSE:JNJ) is one of the best dividend kings on our list as the company has been rewarding shareholders with growing dividends for the past 62 years. It offers a quarterly dividend of $1.24 per share and has a dividend yield of 3.43%, as of January 13.
Of the 900 hedge funds tracked by Insider Monkey at the end of Q3 2024, 81 funds held stakes in Johnson & Johnson (NYSE:JNJ), up from 80 in the previous quarter. The total value of these stakes is over $5.4 billion. With over 5.2 million shares, Marshall Wace LLP was one of the company’s leading stakeholders in Q3.
Overall, JNJ ranks 3rd on our list of best dividend king stocks to invest in now. While we acknowledge the potential for JNJ to grow, 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.
