Shares of Johnson & Johnson (JNJ) might trade at near 52-week highs, but don't hold your breath waiting for its stock price to get cheaper. The healthcare conglomerate, which posted year-to-date stock gains of more than 9%, decided last week to raise its quarterly dividend from 75 cents per share to 80 cents. (See also: Johnson & Johnson: A Dividend King.)
It's Tradition to Say Thank You With Money
JNJ shares closed Friday at $112.08, about $2 below its all-time high of $114.19. Not only has the stock bested the 1% year-to-date rise in the S&P 500 (SPX) index, JNJ stock has outperformed both the Vanguard Health Care ETF (VHT) and the Health Care Select Sector SPDR Fund (XLV), which have fallen more than 4% and 3% year-to-date, respectively.
Why did JNJ raise its dividend, which, before the increase paid an annual yield of 2.66%? That's what the company has done for more than 53 years. Not only is Johnson & Johnson enjoying a strong demand in its consumer business, the New Jersey-based company is still generating tons of cash from stronger-than-expected demand for its blockbuster drugs portfolio
"In recognition of our 2015 results, strong financial position and confidence in the future of Johnson & Johnson, the board has voted to increase the quarterly dividend for the 54th consecutive year," said Alex Gorsky, chairman and Chief Executive Officer of the company. (See also: Johnson & Johnson Seeks to Deliver 10 Blockbusters.)
The company said the new 80-cent per share payment will be made on June 7 to shareholders of record as of market close on May 24. With this new increase, Johnson & Johnson has now raised its dividend by 63% in the past five years. And during that span, its stock price has risen more than 70% against a 51% rise in the S&P 500 index, while the Dow Jones Industrial Average (DJI) has delivered five-year gains of 38%.
The Bottom Line
All told, you would be hard-pressed to find a more stable investment than Johnson & Johnson that combines qualities such as continued cash appreciation, returns on capital and a rich dividend history. In business 131 years, Johnson & Johnson will likely be around for many more generations. And its dividend streak, as with its stock price, will continue its uptrend.