Johnson & Johnson (JNJ -0.08%) is one of the best dividend stocks on the planet. The healthcare behemoth has increased its dividend each year for over six decades, putting it in the super-elite class of Dividend Kings. The company currently offers a roughly 3% dividend yield, which is almost double that of an S&P 500 Index Fund (recently around 1.6%). That highly attractive payout is on an extremely safe foundation.

The company's dividend yield is approaching its highest level since the early days of the pandemic and at the higher end of its range over the past decade. Meanwhile, the company is about to spin off shares of its consumer healthcare business, Kenvue (KVUE -0.31%), to shareholders, giving them another attractive income producer. These factors make Johnson & Johnson stock one income investors should buy hand over fist this June. 

Dividends don't get much safer than this

Johnson & Johnson is a financial fortress. The healthcare behemoth has a AAA bond rating, which is higher than the U.S. Government. While that might not be saying much these days, the healthcare giant's credit is tied with Microsoft for the best globally. 

The company ended the first quarter with only $20 billion of net debt ($33 billion of cash and marketable securities against $53 billion in debt). That's a minuscule amount for a company with a more than $400 billion market cap. The company recently used its financial strength to acquire Abiomed for $16.6 billion in cash to expand its MedTech segment. 

Meanwhile, the company generates ample cash to cover its dividend. Last year, Johnson & Johnson produced $17 billion in free cash flow (after investing $14.6 billion in R&D to continue organically growing the business), easily covering its $11.7 billion dividend outlay. The company returned $2.5 billion of the remaining excess cash to investors by repurchasing shares.

The company's investments in R&D and acquisitions should grow its free cash flow, giving it more money to pay dividends. Johnson & Johnson recently increased its dividend by another 5.3%, marking its 61st straight year of dividend growth. That kept it in the elite group of Dividend Kings, companies with 50 or more years of annual dividend increases. 

A catalyst on the horizon

Johnson & Johnson recently completed the initial public offering (IPO) of its consumer healthcare unit Kenvue, in a deal that will bring in an additional $3.8 billion of cash. The IPO was the first of a two-part process to separate that business. Johnson & Johnson plans to spin off the remaining shares of Kenvue to shareholders later this year. That will enable it to focus on its MedTech and pharmaceutical businesses.

The spin-off should unlock some value for shareholders. Given the stock's slide over the past year, Johnson & Johnson currently trades at less than 15 times its forward earnings. That's cheaper than the broader market as the S&P 500 trades at 18 times forward earnings. By spinning off its slower-growing consumer healthcare business, Johnson & Johnson should fetch a higher market multiple, given the faster growth of its MedTech and pharmaceutical businesses. 

Meanwhile, the spin-off will provide shareholders with another stream of dividend income. Kenvue plans to pay a quarterly dividend with a yield of above 3.5%. It will back that payout with a very strong business that generates lots of durable cash flow from selling iconic brands like Tylenol and Band-Aid. Meanwhile, Kenvue will have a strong balance sheet. That company's financial strength will enable it to invest in organic and inorganic growth so that it can steadily increase its dividend. 

A top-quality dividend with upside potential

Johnson & Johnson is among the safest dividend stocks in the world. It offers a higher-yielding payout that should continue growing. In addition, there's an upside catalyst on the horizon from its pending spin-off of Kenvue. These factors make Johnson & Johnson a stock that dividend investors will want to pile into this month.