Johnson & Johnson's (NYSE:JNJ) Dividend Will Be Increased To $1.24

The board of Johnson & Johnson (NYSE:JNJ) has announced that it will be paying its dividend of $1.24 on the 4th of June, an increased payment from last year's comparable dividend. This takes the dividend yield to 3.3%, which shareholders will be pleased with.

View our latest analysis for Johnson & Johnson

Johnson & Johnson's Dividend Is Well Covered By Earnings

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 indicates that quite a large proportion of earnings is being invested back into the business.

Looking forward, earnings per share is forecast to rise by 46.7% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 49% by next year, which is in a pretty sustainable range.

Johnson & Johnson Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The dividend has gone from an annual total of $2.64 in 2014 to the most recent total annual payment of $4.96. This means that it has been growing its distributions at 6.5% per annum over that time. Dividends have grown at a reasonable rate over this period, and without any major cuts in the payment over time, we think this is an attractive combination as it provides a nice boost to shareholder returns.

Johnson & Johnson Could Grow Its Dividend

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Johnson & Johnson has seen EPS rising for the last five years, at 5.3% per annum. 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. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All of these factors considered, we think this has solid potential as a dividend stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Taking the debate a bit further, we've identified 2 warning signs for Johnson & Johnson that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.