If you are a retiree looking to supplement your Social Security checks with income you derive from dividend stocks, you'll want to get to know Johnson & Johnson (JNJ +0.48%). It has a dividend record that no other healthcare company can match, suggesting that it could set you up for a lifetime of reliable income. Here's what you need to know.
Johnson & Johnson's dividend record
J&J is a Dividend King. There are only four healthcare companies that make that elite grouping, which requires at least 50 consecutive annual dividend increases to join. And of the four, one is AbbVie (ABBV +1.07%), a spin-off that basically "shares" its streak with its former parent Abbot (ABT 1.14%). J&J's streak is the longest at 63 years, which is nine years longer than the 54 years of the other four healthcare Dividend Kings.
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You can't build a record like that by accident. J&J has a strong business plan that is executed well in both good and bad markets. That said, until recently, the business included a consumer products group. That operation was spun off as Kenvue (KVUE +1.26%), which has since agreed to be acquired by Kimberly Clark (KMB +1.50%). At this point, J&J is a pure-play healthcare business.
Johnson & Johnson is still diversified
While J&J's dividend streak sets it apart from other healthcare companies, including pharmaceutical makers, it remains diversified. It is not only one of the world's largest drug makers but also one of the largest medical device makers. Having a medical device business is a huge benefit for long-term investors, as more reliable cash flows from this division help balance out the patent-expiration risks inherent to the drug industry.
NYSE: JNJ
Key Data Points
That said, the company isn't done streamlining its operations, with plans to spin off its orthopedics business in 2027. The separation will focus J&J's medical device business on the cardiovascular, surgery, and vision sectors. Still, its drug business (nearly two-thirds of revenues) will continue to be the driving force.
It is also important to note that the company's credit rating is AAA. That's the highest score awarded, which means the dividend is on very solid financial ground.
Not the largest yield, but still attractive
If there is one problem with J&J as a dividend stock, it is that the yield is roughly 2.2%. While that's twice the S&P 500 index's (^GSPC +0.02%) 1.1% yield, it is still below the 4% that many dividend investors target. However, if you are looking for a reliable dividend from a drug company, this diversified healthcare giant stands above all of your other options in very important ways.
