We received $82.58 (103.22 shares x 80 cents) from Johnson & Johnson (JNJ). This will be the last quarter that Johnson & Johnson (JNJ) will be paying dividends at 80 cents. We are expecting an increase in dividends in the next quarter. Since Nov 2016, the stock price has increased by +10%. The strong performance of the stock price was driven by an acquisition news and a strong Q42016 earnings performance. Johnson & Johnson will acquire Actelion (ATLN), a swiss biopharmaceutical company that specializes in orphan disease treatments. J&J will pay approximately $30billion to Actelion’s shareholders. The acquisition will drive growth for J&J as the firm will have more market access for rare disease treatments. Q4 2016 revenues is US$18.1bn, up +2.3% YoY, largely driven by strong revenue performances from Consumer and Pharmaceutical segment.
Due to the increasing stock price, the dividend yield has been on a downward trend since Q42016. The dividend yield is +2.5% which is near to 10-year low; however, the dividend yield of Johnson & Johnson (JNJ) still outperforms the 2% dividend yield of S&P500.
The dividend payout ratio is 0.50. Since 2015, J&J payout ratio is in between 0.50 to 0.55 range. We are expecting that the payout ratio will still be in this range in the near future.
The dividend growth between 1yr to 10 yrs period is between +6.7% to +7.8%. In dollar amounts, the firm has been paying between 3 cents to 5 cents annually in the last 10 years. Historically, J&J has a conservative dividend growth rate but it has been annually increasing its dividend since the 1950’s.
Based from our analysis, the current trends for dividend yield and dividend payout ratio will continue in the future. We are expecting in the next quarter, there will be a dividend increase between 6.5% to 7%. Also, with the recent acquisition, we are expecting further growth for the company in 2017.