Johnson & Johnson Is a King of Dividend Safety

Core Viewpoint - Johnson & Johnson is positioned as a highly reliable dividend stock, supported by strong cash flow and a robust balance sheet, making it an attractive option for income-seeking investors [1]. Financial Strength - Johnson & Johnson holds a AAA bond rating from multiple credit agencies, indicating a superior capacity to meet financial obligations, even better than the U.S. federal government [2]. - The company ended the first quarter with $26 billion in cash and marketable securities against$34 billion in debt, resulting in a net debt of only 7 billion and a low leverage ratio [2]. - In the previous year, Johnson & Johnson generated 18 billion in free cash flow, which was sufficient to cover its net debt twice over [2]. Dividend Sustainability - The company produced $18 billion in excess cash after investing$15.1 billion in R&D, easily covering its dividend outlay of $11.8 billion and allowing for$2.5 billion in stock repurchases [3]. - Johnson & Johnson raised its dividend by 4.2% earlier this year, marking the 62nd consecutive year of dividend increases, placing it among the elite Dividend Kings [4]. Dividend Yield Comparison - Johnson & Johnson's current dividend yield stands at 3.4%, significantly higher than the S&P 500's yield of 1.4%, providing $34 in annual dividend income for every$1,000 invested compared to $14 from the S&P 500 [5]. - The company anticipates operational sales growth of 5% to 7% annually through 2030, which is expected to drive adjusted operational earnings-per-share growth of over 7% annually [5]. Investment Flexibility - Johnson & Johnson's strong balance sheet and free cash flow allow for continued investments in R&D and acquisitions, enhancing its earnings and dividend growth potential [6].