Johnson & Johnson (NYSE:JNJ) Will Pay A Larger Dividend Than Last Year At $1.24

The board of Johnson & Johnson (NYSE:JNJ) has announced that it will be increasing its dividend by 4.2% on the 4th of June to $1.24, up from last year's comparable payment of $1.19. This makes the dividend yield 3.3%, which is above the industry average.

See our latest analysis for Johnson & Johnson

Johnson & Johnson's Earnings Easily Cover The Distributions

If the payments aren't sustainable, a high yield for a few years won't matter that much. The last dividend was quite easily covered by Johnson & Johnson's earnings. This means that a large portion of its earnings are being retained to grow the business.

Looking forward, earnings per share is forecast to rise by 28.2% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 50%, which is in the range that makes us comfortable with the sustainability of the dividend.

Johnson & Johnson Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The annual payment during the last 10 years was $2.64 in 2014, and the most recent fiscal year payment was $4.76. This works out to be a compound annual growth rate (CAGR) of approximately 6.1% a year over that time. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.

We Could See Johnson & Johnson's Dividend Growing

The company's investors will be pleased to have been receiving dividend income for some time. We are encouraged to see that Johnson & Johnson has grown earnings per share at 7.7% per year over the past five years. Since earnings per share is growing at an acceptable rate, and the payout policy is balanced, we think the company is positioning itself well to grow earnings and dividends in the future.

Johnson & Johnson Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that Johnson & Johnson is a strong income stock thanks to its track record and growing earnings. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we've picked out 1 warning sign for Johnson & Johnson that investors should take into consideration. Is Johnson & Johnson not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.