Johnson & Johnson (JNJ 0.70%) is dividend royalty. The healthcare behemoth has increased its dividend payment for 62 straight years. That puts it in the elite group of Dividend Kings, companies with 50 or more years of consecutive annual dividend growth.
The healthcare stock also stands out for its higher dividend yield. With a nearly 3.3% forward dividend yield, an investment in Johnson & Johnson would generate more than double the dividend income of a similar investment in an S&P 500 index fund (a roughly 1.3% trailing-12-month dividend yield).
Even at that much higher rate, you'd still need to invest a sizable amount of money to collect $1,000 of annual dividend income from Johnson & Johnson. At the healthcare giant's current payment rate of $1.24 per share quarterly ($4.96 annualized), you'd need to own about 202 shares of Johnson & Johnson to earn $1,000 of annual dividend income ($1001.92 to be precise). With shares of Johnson & Johnson recently trading at around $153 apiece, you'd need to invest about $31,000 into its stock to collect $1,000 in annual dividend income.
That's a sizable sum for most investors, especially when they should hold a diversified portfolio of at least 25 stocks. That investment level implies you'd want to have a portfolio of around $775,000 to comfortably allocate the $31,000 needed to buy Johnson & Johnson stock to collect $1,000 of dividends each year.
You could opt to hold a higher allocation to Johnson & Johnson (potentially as much as 10% of your portfolio's value) because of its financial strength. The company has a AAA credit rating (higher than the U.S. government), backed by a cash-rich balance sheet and a business that generates lots of stable growth cash flow. Those features should enable Johnson & Johnson to continue paying a sustainable and steadily rising dividend. Because of that, it's an ideal stock for those seeking a safe and healthy stream of dividend income.
