We recently compiled a list of the 10 Best Blue Chip Dividend Stocks To Buy. In this article, we are going to take a look at where Johnson & Johnson (NYSE:JNJ) stands against the other blue chip dividend stocks.
When it comes to investing in stocks, investors often keep a close eye on the company’s financial health. Why? Because it directly impacts the potential returns on their investments. This is especially crucial for income investors, as solid financial health ensures regular dividend payments and steady dividend growth. In short, a company’s strong financial footing means it’s more likely to keep the cash flowing and the dividends climbing. Blue chip companies, especially those with over $100 billion in market cap, take the lead in this area. These firms are well-established, financially stable, and top players in their industries.
The Dow Jones Industrial Average is commonly regarded as an index of blue chip stocks. This widely watched stock market index includes 30 of the largest and most established publicly traded companies in the US. The index surged by over 4.7% since the start of 2024 and in the past 12 months, it gained 16.4%.
When comparing the performance of the broader market and the Dow Jones, both of which track large-cap U.S. companies, historical data reveals a high correlation between the two indices over time. However, there have been notable instances where their performances diverged significantly. According to a report from S&P Dow Jones Indices, the market substantially outperformed the Dow Jones over one- and three-year periods. Conversely, over the 30-year period leading up to 2019, the Dow Jones slightly outperformed the broader market. This indicates that although these indices often move together, short-term performance can vary, and specific market conditions and economic factors can influence which index performs better during different periods. The Dow Jones underperformed the broader market in 2023 by a wide margin.
While analysts frequently compare the performance of these two indices, it is important to note that the Dow represents only a small segment of the economy. In contrast, the broader market includes nearly 17 times as many companies. According to estimates from S&P Dow Jones Indices, more than $11.2 trillion investments were benchmarked to the broader market at the end of 2019. This is a staggering 350 times greater than the $32 billion benchmarked to the Dow. A key reason for the broader market’s outperformance compared to the Dow last year is that the market places more emphasis on the tech giants, which were the primary drivers of the wider market’s gains throughout the year.
Returning to the importance of blue chip companies, investors favor these firms because their strong financial health allows them to grow their dividends consistently. Dividend growth has remained a strong preference of investors over the years, prompting companies to increase their dividend payouts steadily. In this article, we will take a look at some of the best blue-chip dividend stocks.
Our Methodology:
For this list, we began by examining the current members of the Dow 30 that boasted a minimum market capitalization of $100 billion as of July 7. From this initial group, we specifically focused on companies that consistently pay dividends to their shareholders and have yields of at least 2%, as of July 7. These stocks were then ranked in ascending order of the number of hedge funds having stakes in them at the end of Q1 2024, as per Insider Monkey’s 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: 80
Johnson & Johnson (NYSE:JNJ) is an American pharmaceutical industry company that also specializes in healthcare consumer products. The company has been under significant pressure due to numerous talc lawsuits involving tens of thousands of people who claim that the company’s talc products, such as baby powder contain asbestos and can cause ovarian cancer. If the company can successfully resolve this issue, it would remove what is arguably the biggest risk and uncertainty facing the business today, potentially providing a boost to the stock. Since the start of 2024, the stock has declined by over 8%.
That said, Johnson & Johnson (NYSE:JNJ) is focusing on the next phase of its business, which investors hope will lead to greater growth than in previous years. Last year, the company spun off its consumer health division, and now, with only two main segments—medical devices and innovative medicines—it might be well-positioned to boost its growth rate. In the first quarter of 2024, the company posted revenue of over $21.3 billion, which showed a 2.3% growth from the same period last year. Its international sales saw a decline of 3.4% on a YoY basis. Its innovative medicine segment accounted for $13.5 billion of its total revenue. The company expects a modest increase in its growth rate. Management projects an annual operational growth rate of 5% to 7% from 2025 to 2030. In addition, the company expects to have over 10 assets capable of generating at least $5 billion in peak annual sales.
Johnson & Johnson (NYSE:JNJ) holds one of the longest dividend growth streaks in the market, spanning over 62 years. The company pays a quarterly dividend of $1.24 per share for a dividend yield of 3.39%, as of July 7.
At the end of March 2024, 80 hedge funds in Insider Monkey’s database reported having stakes in Johnson & Johnson (NYSE:JNJ), compared with 81 in the previous quarter. These stakes have a collective value of more than $4.2 billion. With over 6.6 million shares, Fisher Asset Management was the company’s leading stakeholder in Q1.
Overall JNJ ranks 3rd on our list of the best blue chip dividend stocks to buy. You can visit 10 Best Blue Chip Dividend Stocks To Buy to see the other blue chip dividend stocks that are on hedge funds’ radar. 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 timeframe. If you are looking for a deeply undervalued dividend stock that is more promising than JNJ but that trades at less than 7 times its earnings and yields nearly 10%, check out our report about the dirt cheap dividend stock.
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Disclosure: None. This article is originally published at Insider Monkey.