Johnson & Johnson (JNJ -0.61%) and Becton, Dickinson (BDX -0.97%) are set-it-and-forget-it dividend stocks in the healthcare sector. By that, I mean these companies, both of which were founded in the late 1800s, are Dividend Kings that have raised their dividends for 50 or more straight years -- the very definition of dependable.
They are huge, mature companies, so it's unlikely for them to have explosive revenue growth, but rather, a steady consistent rise that makes them attractive long-term holds for investors. It's not that these companies aren't affected by the vicissitudes of the market, but they have the financial depth to overcome obstacles such as lawsuits, supply chain issues and the like.
Johnson & Johnson: The stalwart that pays off
Johnson & Johnson stock is down only a little more than 1% this year while the S&P 500 is off more than 19%. In its most recent quarterly release, the company reported second-quarter revenue of $24 billion, up 3% year over year and earnings per share (EPS) of $1.80, down 24% over the same period in 2021. The company's guidance puts annual revenue between $97.3 billion and $98.3 billion, up between 6.5% and 7.5% over 2021. J&J also said it expects yearly adjusted EPS of between $10 and $10.10, up 2.1% to 3.1%, year over year.
Johnson & Johnson said it expects to increase its profit margin once it completes the spin-off of its consumer healthcare division by November 2023. For example, in the second quarter, the company's pharmaceutical segment was responsible for $13.3 billion in revenue, up 6.7%, year over year, while consumer healthcare brought in $3.8 billion, down 1.3% over the same period in 2021. The company's other segment, MedTech, brought in $6.9 billion, down 1.1%, year over year.
The company has consistently looked for ways to support its stock price, including a commitment announced this month to repurchase up to $5 billion worth of its stock. Meanwhile, J&J raised its dividend this year by 6.6% to $1.13 per share, the 60th consecutive year it has increased its dividend. The yield at recent prices is around 2.74% with a safe dividend payout ratio of 63%.
All in all, Johnson & Johnson offers a long track record of performance that stands to continue doing well for investors.
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Becton, Dickinson joined an elite club
Becton, Dickinson's stock is up 1% for the year. That's because, similar to Johnson & Johnson, it is considered a safe-haven stock by investors. Over the past 10 years, BD's total return is 281%. The company is one of the largest medical technology companies in the world; its products range from syringes and pharmacy automation devices to bioscience reagents and molecular diagnostic equipment.
The company released its third-quarter report on Aug. 4 and revenue was reported as $4.6 billion, up 0.7%, year over year, while EPS was listed at $1.28, down 3% over the same period in 2021. Adjusted (non-GAAP) EPS was listed at $2.66, up 16.7%.
Like Johnson & Johnson, Becton, Dickinson has great diversity in its business. So while its Life Sciences segment saw revenue fall 8.7%, year over year, because its COVID-19 testing revenue fell dramatically, the Medical segment saw revenue rise 4.7% and its Interventional business (comprising surgery, peripheral intervention, and urology and critical care units) saw revenue up 5.5% compared to the same period in 2021. The company has seen growing demand for its pharmaceutical systems, including prefilled dosages.
The company said it expects full-year revenue growth this year of between 8.75% and 9.25% and full-year adjusted EPS between $11.28 and $11.35.
Becton, Dickinson, by completing the spin-off of its diabetes business as a new company, Embecta, in April, has also streamlined its business a bit, which should help its profit margins going forward.
The company increased its dividend by 4.8% last year to $0.87 per quarterly share, the 50th consecutive year it has raised its payout. The yield at its most recent share price is 1.36%, not spectacular, but well ahead of the healthcare products industry average of 0.49%. Its payout ratio is a safe 52%.
Keeping the long-term view
This year has been a great litmus test for both healthcare companies. While many healthcare stocks saw their shares plummet, Johnson & Johnson and Becton, Dickinson and Company have easily outpaced the S&P 500. That's because they are largely inflation-proof businesses with plenty of built-in diversity. The fact they are both Dividend Kings isn't lost on investors either, as they are models of consistency, both in terms of dividend safety and dividend growth.
Neither company will likely see massive revenue growth, but they are focusing on improving their margins, which will help them keep raising their dividends -- to the benefit of shareholders.
