Johnson & Johnson (NYSE: JNJ)
Johnson & Johnson is a well-known brand in the pharmaceutical and consumer healthcare markets. With a diverse business model spanning pharmaceuticals, medical technology, and consumer products, the company holds a significant market presence. However, by the end of this year, J&J plans to spin off its consumer health division into a new company called Kenvue.
The primary goal of this spin-off is to focus more on its highest revenue-generating segment—pharmaceuticals. This division includes several high-performing immunology and oncology drugs.
- Stelara and Tremfya, two immunology treatments, grew double digits last year, generating a combined revenue of $12.3 billion.
- Darzalex, an oncology treatment for multiple myeloma, saw its sales surge 32% to $8 billion in 2022.
- Erleada, a prostate cancer treatment, grew 45.7% to $1.9 billion.
- The pharmaceutical segment as a whole generated $52.5 billion in revenue in 2022.
J&J continues to invest heavily in future growth, spending $14.6 billion on R&D last year. Many of the pipeline drugs could become major revenue drivers in the coming years.
J&J’s stable and growing business has led to 60 consecutive years of annual dividend increases, earning it the title of “Dividend King.”
- Dividend payout ratio: 41%
- Dividend yield: 2.8% (much higher than the S&P 500’s average yield of 1.7%)
With strong and consistent cash flow, the company can easily sustain its dividend payments.
J&J has a proven track record of performing well even in downturns, making it a strong long-term investment for consistent dividend payments during volatile periods.
Medtronic (NYSE: MDT)
Medtronic has built a strong reputation as a dividend stock, having increased its dividend for 45 consecutive years. This steady growth in payouts highlights the company’s ability to maintain business stability over time.
- Current dividend yield: 3.24% (significantly higher than the market average)
While Medtronic’s recent earnings may have raised concerns among investors, the company remains fundamentally strong.
- In Q3 of the 2023 fiscal year (ending January 27), Medtronic reported flat total revenue of $7.7 billion compared to the prior year.
- Adjusted EPS declined 4% year-over-year to $1.30.
- Management attributed the drop to external macroeconomic headwinds.
However, Medtronic expects stable revenue growth in future quarters as these short-term challenges subside.
Despite the temporary slowdown, Medtronic ended the quarter with $2.5 billion in free cash flow, which should comfortably support its dividend payments and long-term growth strategies.
While growth stocks are often susceptible to short-term headwinds, the key factor is long-term potential.
Medtronic has substantial room to expand within the medical device industry, which is projected to grow at a CAGR of 5.5%, reaching $719 billion by 2029.
The company is also entering the rapidly expanding robotic surgery market.
- Hugo RAS, Medtronic’s robotic-assisted surgical system, has already been approved in international markets.
- Management reports strong sales momentum.
- In December, Hugo RAS was used for the first-ever robot-assisted urological procedure in the U.S.
With its diverse product portfolio and consistent dividend payouts, Medtronic remains an attractive healthcare stock for long-term investors.
