Dividend stocks are some of the best ways to make money in the stock market, but they're only as useful as their stability. You don't want to invest in a company mainly for its dividend, only to have that reduced or completely cut.
One company that hasn't had that trouble is Johnson & Johnson (JNJ 0.50%). With 64 consecutive years of dividend increases, J&J is one of the premier Dividend Kings (companies with at least 50 consecutive years of increases). But is it the ultimate safe dividend stock?
Image source: The Motley Fool.
One of the best ways to measure a dividend's safety is to look at the company's free cash flow relative to its dividend payout. Last year, Johnson & Johnson had $20.4 billion in free cash flow and paid $12.4 billion in dividends. That 61% ratio is strong and indicative of a healthy dividend.
NYSE: JNJ
Key Data Points
Whether this is the ultimate safe dividend stock to buy depends on whether you're looking strictly at financial metrics. There are companies with better (lower) payout ratios -- but they don't have J&J's longevity and balance sheet.
With $21.7 billion in cash and cash equivalents as of the end of the first quarter, the healthcare giant has the resources to keep its dividend rolling. Over the past decade, Johnson & Johnson has averaged a 2.7% dividend yield, well above the market average.
