With its listing on the New York Stock Exchange on May 4 and the conclusion of its initial public offering (IPO) on May 8, Kenvue (KVUE -0.84%) is finally a separate entity from Johnson & Johnson (JNJ -0.46%).

The IPO raised net proceeds of $4.2 billion, and it marks the birth of a new giant within the consumer health products industry. And that may bring new opportunities for investors, too.

But consumer health goods businesses aren't exactly known for being fast-growing, and Kenvue still has a lot to prove now that it's standing on its own. So will this stock be a good fit for your portfolio? Let's investigate. 

Why you might be interested in owning this stock

In case you aren't familiar, Kenvue owns the rights to dozens of popular consumer health brands like Listerine, Aveeno, Tylenol, Motrin, Baby Powder, and even Band-Aids. Everything that was once in Johnson & Johnson's portfolio of over-the-counter medicines, cosmetics, and self-care products is now in this company's stable.

In 2022, sales of those products brought in $15 billion, and there isn't much reason to believe that sales will increase significantly in the near term. After all, you probably aren't going to be buying a lot more mouthwash, moisturizer, sunscreen, or shampoo anytime soon. But you probably won't be buying much less than usual, either. Plus, you (and everyone else) almost certainly have preferred consumer health brands you always buy because they work for you and they're what you're used to.

And that's one of the core appeals of an investment in this company: People use at least a few of Kenvue's range of products every single day, for years on end, or perhaps for their entire lives. It doesn't matter much if the economy or market is surging or collapsing; consumers are going to keep buying their daily use products more or less no matter what. Brand loyalty is a significant competitive advantage, and it's what will likely make Kenvue's cash flows quite consistent from quarter to quarter.

With consistent cash flows, in theory, it should be able to pay a dividend that investors can count on, and management has signaled as such. Current estimates call for it to have an annual dividend yield of around 3.7%, though that could change in time. In 2022, Kenvue had net income of more than $2 billion, up from $1.4 billion in 2019. And right now, it doesn't have anything in the way of long-term debt. The potential for those who buy shares today to capture dividend growth for years is one of the stock's major appeals, and it doesn't look like there's anything that could threaten that for now. 

Except, that is, the possibility of being held liable for some of the damages stemming from Johnson & Johnson's cancer-causing talc powder products. While J&J has indemnified Kenvue from having any liability for talc lawsuits in the U.S. and Canada, lawsuits brought in other jurisdictions may not get the same treatment. There's no guarantee that international lawsuits will actually happen, however. And even if they are, J&J might decide to take responsibility for the liability once again, so Kenvue may be protected.

It might be better to wait for more of a track record

Regardless of the stock's probable stability, there are a few reasons why now might not be the right time to buy Kenvue, starting with its newness.

While it's true that the company has decades of decent performance as a unit of Johnson & Johnson, part of the reason for the spinoff was to grant Kenvue more organizational leeway to focus on growth, as well as return capital to shareholders. Though there's little reason to believe that it would fail to continue to do that now that it's separate from J&J, management's promises simply haven't had enough time to be fulfilled. And, considering that J&J still owns 90% of the company, it's questionable how much new organizational leeway it'll actually have.

In other words, it's possible that this stock will not be as stable or its dividend as safe as Johnson & Johnson's was over the long term, despite its favorable setup with lots of recurring revenue. Likewise, it may not be able to capture the alleged benefits of independence, because it might not end up being that independent in practice. Most investors will be unwilling to wait for decades for Kenvue's track record to become extensive. So for the most conservative investors, it's probably best to wait for at least a few years to make sure that the risks stemming from its spinoff have been resolved.

Its valuation is another concern. Its price-to-earnings (P/E) multiple is 34, which is quite high considering rapid growth is unlikely in the future. That likely rules it out as a good purchase for value-sensitive investors, and of course, there's little reason for growth-seeking investors to approach it either. 

In the long run, its valuation may change or become justified, and its growth characteristics may convincingly change. Until then, it's hard to justify buying Kenvue's stock.

Still, keep an eye on its earnings reports and announcements to see management's plans for stimulating growth. If there's a major new initiative, it could easily change the calculus for buying it.