The stability of Johnson & Johnson (JNJ -0.47%) has attracted investors for a long time. The healthcare company with more than 140,000 employees is a Dividend King that has raised its quarterly dividend annually for 60 consecutive years, including a 6.6% bump this year to $1.13 per share, resulting in a yield of about 2.58%. 

Over the past year, the stock price is up more than 10%, and so far in 2022, it is up more than 2.7%, well ahead of the drop of more than 17% so far this year by the S&P 500.

The company has built-in diversity because it is so large and operates in three segments: pharmaceuticals, medtech, and consumer healthcare. The last segment, the only one that is underperforming this year, will be spun off into a new stand-alone company next year called Kenvue.

Johnson & Johnson has grown annual revenue and earnings per share by 39.5% and 102.3%, respectively, over the past 10 years. Based on the company's guidance of 2022 revenue landing between $93 billion and $93.5 billion, it is on track to increase revenue for the seventh consecutive year. That kind of consistency is rare in the stock market, and over time, that makes a big difference for long-term investors.

JNJ Revenue (Annual) Chart

JNJ Revenue (Annual) data by YCharts

What 100 shares would have cost in 2012

In early December 2012, 100 Johnson & Johnson shares would have cost $6,965. Just on the stock's performance (including one stock split), those 100 shares would be worth $17,584 today. But if you reinvested Johnson & Johnson's quarterly dividends, those 100 shares would have produced a total return of $23,210.68 today. That works out to an annual return of 12.82% over the past decade. That compares favorably to the S&P 500 average, which saw a 10.83% annual return over the past 10 years.

Johnson & Johnson's long-term performance is due to its size and diversity. The company is in a solid position going forward, in part, because it has a low debt-to-equity ratio of 0.75. In the third quarter, the company reported sales of $23.8 billion, up 1.9% year over year; net income of $4.5 billion, up 21.6% over the same period in 2021; and earnings per share of $1.68, up 22.6% year over year. It's not that the company isn't affected by the inflationary and supply chain concerns that have hurt other companies, it is just less affected by them because its products are, by and large, not discretionary. Though medtech sales fell during the peak of the COVID-19 pandemic, people can put off an artificial hip or artificial knee procedure for only so long. The company's pharmaceutical products are even less discretionary.

Through the first nine months of 2022, the healthcare company already has nine pharmaceutical therapies with sales of $1 billion or more, led by Stelara and Darzalex. Stelara, used to treat a multitude of inflammatory diseases, had sales of $7.3 billion in that period, up 7.9% year over year. In August, the drug gained another Food and Drug Administration (FDA) approval, to treat children with active psoriatic arthritis. Darzalex, used to treat multiple myeloma, saw $5.9 billion in sales through the first three quarters, up 34.6% over the same period last year.

Leveraging strength to find more growth

The one criticism of Johnson & Johnson's earnings is, like with many huge mature companies, growth is limited. That may not be true for long. First, as mentioned, it's shedding its consumer healthcare segment, which should improve margins overall. For example, through the first three quarters of 2022, the segment's revenue was up only 2.1% year over year, while medtech's was up 7.7% and pharmaceutical's (taking out vaccine sales) was up 7%. The consumer healthcare spinoff is supposed to take place probably in the second half of 2023.

The company has been especially busy in spending on research and development on oncology therapies, with six FDA approvals this year and 17 other oncology phase 2 trials ongoing. Imbruvica alone had three new label expansion approvals this year.

Johnson & Johnson hasn't been shy about using its ample cash to buy up other companies that are showing big growth. On Nov. 1, the company announced a $16.8 billion deal to buy Abiomed, maker of the Impella line of heart pumps and other minimally invasive cardiac and lung devices. The deal is expected to close by next March and be accretive to Johnson & Johnson's earnings by 2024, the company said.

Johnson & Johnson is also among the suitors looking to buy Horizon Therapeutics, which did $925.4 million in sales in the third quarter. Horizon specializes in therapies to treat rare and rheumatic diseases, and its best-selling drug, Krystexxa, treats gout.