We recently published a list of S&P 500 Dividend Aristocrats List: Sorted By Hedge Fund Sentiment. In this article, we are going to take a look at where Johnson & Johnson (NYSE:JNJ) stands against other S&P 500 dividend aristocrats sorted by hedge fund sentiment.
Dividend Aristocrats are companies that have consistently increased their dividend payments for at least 25 consecutive years. While they are an integral part of the broader market, they have been overshadowed recently by the surge in technology stocks. In 2024, the Dividend Aristocrats Index rose by about 6%, trailing the broader market’s nearly 27% gain and NASDAQ’s impressive 35% return. However, the long-term appeal of dividend stocks remains strong. These companies have proved their mettle, continuing to reward shareholders even during challenging market conditions.
Historical data underscores the effectiveness of dividends in keeping pace with inflation and cushioning the effects of economic downturns over the past century. This makes them a crucial element of long-term investment strategies. Dividend payouts have remained relatively stable compared to earnings per share across multiple recessions. For instance, during the 2007–2009 global financial crisis, while the broader market dropped by 41% and earnings per share plunged by 92%, dividends per share declined by just 6%, according to a report by The Vanguard Group. This stability plays a key role in preserving income streams and enhancing total returns, which factor in both price appreciation and reinvested dividends.
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The report also emphasized the importance of diversifying investments across different sectors and regions to safeguard against industry-specific downturns and geopolitical uncertainties. A clear example of this occurred during the initial COVID-19 lockdowns in 2020 when European banks, following regulatory directives, suspended dividend payments to account for potential loan losses. Although many banks were financially capable of maintaining payouts, most distributions were delayed until 2021, disrupting investors’ regular income. Adopting a diversified investment strategy not only helps stabilize cash flow but also strengthens overall returns, making portfolios more resilient to economic volatility.
That said, a company’s history of annual dividend increases, no matter how long, does not guarantee future payouts. The year 2020 served as a significant test of the stability of Dividend Aristocrats. When the pandemic hit in March, consumer demand plummeted across various industries, leading many companies to reduce or suspend their dividends. Some made this decision voluntarily, while others were required to do so as a condition of accepting stimulus funds. By the end of 2020, a total of 66 companies within the broader market had distributed less in dividends compared to 2019.
In recent years, dividend investing has gained popularity, particularly during periods of heightened market volatility. Investors have increasingly recognized the value of dividend stocks, steadily allocating capital to them to benefit from their long-term potential. Annual dividend payouts from the broader market have been rising, climbing from $420 billion in 2017 to $522 billion in 2021 and reaching a record $588.2 billion by 2023. This upward trend highlights the role of dividend stocks in generating both growth and income over time. In addition, dividends have been a significant driver of overall market returns, accounting for approximately 17% of the total return from 2013 to 2022, according to a Morgan Stanley report.
Our Methodology
Dividend aristocrats are the companies that have increased their dividends consistently over the past 25 consecutive years. We scanned Insider Monkey’s database of over 1,000 hedge funds and picked the top 10 dividend aristocrats, which means the stocks mentioned in this list are the most popular dividend aristocrats among the elite hedge funds in America. The list is ranked in ascending order of the number of hedge funds having stakes in the companies.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
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Johnson & Johnson (NYSE:JNJ)
Number of Hedge Fund Holders: 98
Johnson & Johnson (NYSE:JNJ) is a New Jersey-based multinational pharmaceutical company. The company is strengthening its dedication to innovation and expansion through strategic acquisitions. It has unveiled plans to acquire Intra-Cellular Therapies for over $14 billion, reinforcing its commitment to central nervous system disorder treatments. The acquisition will be funded through a combination of cash reserves and debt, with the transaction expected to close later this year. This marks the largest biotech acquisition in more than a year, indicating a resurgence in healthcare mergers and acquisitions following a slower 2024 when major pharmaceutical companies focused on integrating their post-pandemic purchases.
In the fourth quarter of 2024, Johnson & Johnson (NYSE:JNJ) reported revenue of $22.5 billion, reflecting a 5.2% increase from the previous year. As a leading healthcare company, it continues to develop treatments for conditions with significant unmet medical needs, such as multiple myeloma, lung cancer, inflammatory bowel disease, and heart failure. The MedTech segment experienced a 6.2% rise in global operational sales, with acquisitions and divestitures contributing 1.5% to this growth. The Cardiovascular division saw strong demand for electrophysiology products and Abiomed, while the General Surgery segment benefited from higher sales of wound closure products.
Johnson & Johnson (NYSE:JNJ) currently pays a quarterly dividend of $1.24 per share for a dividend yield of 3.06%, as of February 23. It is one of the best dividend aristocrat stocks on our list as the company has been raising its payouts for 62 consecutive years.
Overall, JNJ ranks 4th on our list of S&P 500 dividend aristocrats sorted by hedge fund sentiment. While we acknowledge the potential for JNJ as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than JNJ but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.