Dependable cash flow is a nice thing, especially for income-oriented investors. You have to pay your electric bill and rent or mortgage every month, why not get a dividend check every month as well, to help pay your bills?
There are companies that deliver a monthly dividend, but the better move, at least for diversity and safety's sake, is to get a monthly dividend check each month by finding dependable dividend payers that deliver in different months.
Using that logic, I picked Johnson & Johnson (JNJ 0.82%), AbbVie (ABBV 0.89%), and Medtronic (MDT 1.37%). All three healthcare companies have raised their dividends for 25 consecutive years or more and their dividends have a yield of 2.9% or more, well above the S&P 500 average of 1.7%.
Johnson & Johnson consistently delivers
Johnson & Johnson raised its dividend by 6.6% last year to $1.13 a quarterly share, the 60th consecutive year it has increased its quarterly dividend. It has a yield of about 2.9%. That means if you bought 900 shares of Johnson & Johnson stock, you would earn $1,017 every quarter, or to put it in monthly terms, you would receive that amount in March, June, September, and December.
Johnson & Johnson's family of companies operate in three divisions: pharmaceutical, consumer healthcare, and medical technology. The company reported 2022 earnings of $94.9 billion, up 1.3%. It sells products in more than 200 countries and its earnings were adversely affected by unfavorable foreign exchange rates, with earnings per share (EPS) falling almost 14% to $6.73.
Johnson & Johnson's cash dividend payout ratio of 68% is a tad high, but the company expects revenue to rise by 5% this year to $97.4 billion, meaning another dividend increase seems likely. It will be an interesting year for the company as it spins off its consumer health segment into a separate company, Kenvue, but that should help the company's profit margin as the segment has been its least profitable.
MDT Dividend data by YCharts
AbbVie has planned for the future
Pharmaceutical company AbbVie increased its quarterly dividend 4.9% this year to $1.48, the 51st consecutive year it has increased its dividend, counting its time as a division of Abbott Laboratories. The yield on AbbVie's dividend is about 3.8%. The company's cash dividend payout ratio of 41% shows the company can easily afford to increase its dividend. To earn $1,110 in the months that company pays its dividend (February, May, August, and November), you would need to buy 750 shares of AbbVie stock.
AbbVie reported 2022 full-year revenue of $58.1 billion, up 3.3%, and full-year EPS of $6.63, up 2.8%. The concern for AbbVie this year is that immuno-oncology blockbuster drug Humira will face biosimilar competition for the first time in the U.S. The company didn't issue a full-year revenue projection; it only said it expected 2023 adjusted EPS to be between $10.70 and $11.10, after having adjusted EPS of $13.77 in 2022. It also said it expected Humira sales to drop by 37% this year. While that's a considerable fall, it's not enough for AbbVie to trim its dividend, which has increased by 270% since its split from Abbott in 2013.
Thanks to expanding indications and sales of its other immuno-oncology blockbusters, Skyrizi and Rinvoq, AbbVie Chief Executive Officer Richard Gonzalez said the company should return to improved revenue by 2025. The two drugs brought in $7.7 billion in 2022 and AbbVie said it expects that number to nearly triple by 2027.
"Looking forward, we have a solid foundation which will allow us to absorb the U.S. Humira loss of exclusivity, return to strong top-line growth in 2025 and drive top-tier financial performance over the long term," Gonzalez said in the fourth-quarter earnings release.
There are plenty of reasons to be bullish on AbbVie's future, as it had 11 drugs with $1 billion or more in sales in 2023 and more than 100 programs in its drug pipeline.
Medtronic prepares to bounce back
Medical equipment maker Medtronic increased its quarterly dividend by 7.9% last year to $0.68 a share, the 45th consecutive year it has boosted its dividend. It has a current yield of around 3.3%. To earn $1,088 in the months it pays a dividend (January, April, July, and October), you would need to own 1,600 shares of Medtronic stock. Medtronic has increased its dividend by 262.9% over the past decade.
One concern is Medtronic's cash dividend payout of 85% is the highest of these three stocks. However, the company, in its fiscal 2023 third-quarter presentation, reiterated its emphasis on its dividend, saying that it was committing to returning at least 50% of the company's free cash flow to shareholders, with the bulk of that being through dividends.
In the fiscal third quarter of 2023, ended Jan. 27, the company reported revenue of $7.73 billion, down 0.4% year over year, and EPS of $0.92, down 16% over the same period last year. However, the company is undergoing a restructuring that allowed it to say it expected fourth-quarter organic revenue growth of 4.5% to 5%.
"Given our third-quarter performance, we are raising our full year outlook and expect our momentum to continue in the fourth quarter," Medtronic CEO Karen Parkhill said in the Q3 earnings release.
The areas that seem to be growing the most include the company's cardiovascular and neuroscience portfolios, with its cardiac rhythm management and spine portfolios bouncing back from pandemic lows. The company's leadless pacemakers, in particular, are doing well, with sales up 14% in the third quarter year over year.
Medtronic's Hugo robotic-assisted surgery (RAS) system is also expected to drive revenue as the company ramps up to compete with the industry-leading da Vinci RAS from Intuitive Surgical. The Hugo got its CE Mark approval for urologic and gynecologic procedures in Europe last year and in December, the company enrolled the first patient in its Expand URO U.S. clinical trial for urologic procedures.
