The 10 Most Recession-Proof Dividend Aristocrats

#8 – Johnson & Johnson

• 2007 through 2009 total return of 5.8% (versus -15.9% for the S&P 500)
• 2007 through 2009 maximum drawdown of 34.4% (versus 55.2% for the S&P 500)

Johnson & Johnson (NYSE:JNJ) could have the best record of consistency of any publicly traded corporation.

The company has paid increasing dividends for 53 consecutive years, and has 31 consecutive years of adjusted earnings-per-share growth.

As one would expect from such a stable business, Johnson & Johnson marched through the Great Recession of 2007 to 2009 without missing a beat. The company saw earnings-per-share grow each year of the Great Recession:

• 2007 earnings-per-share of $4.15
• 2008 earnings-per-share of $4.57
• 2009 earnings-per-share of $4.63

What is interesting to me is that Johnson & Johnson (NYSE:JNJ) had a maximum drawdown of 34.4% during the Great Recession… And yet its earnings kept climbing higher. This is very clear evidence of overreaction during recessions.

Investors will often sell exceptional businesses that will only be minimally effected by economic declines during recessions. This creates opportunities for less spooked investors to own shares of truly high quality companies for bargain prices. There is simply no reason Johnson & Johnson’s stock should have declined over 34% during the Great Recession if one paid attention to earnings and dividends instead of fretting over how far shares might fall.

There’s no denying Johnson & Johnson is a high quality dividend growth stock. The company has compounded earnings-per-share and dividends at 5.6% and 8.9% a year, respectively, over the last decade. Investors in Johnson & Johnson should expect slow and reliable growth of around 6% a year combined with the company’s current 3.3% dividend yield for total returns of around 9% a year.

Johnson & Johnson (NYSE:JNJ) is currently trading at a price-to-earnings multiple of 16 – this is below the S&P 500’s current price-to-earnings ratio of 18.8. Johnson & Johnson appears somewhat undervalued at this time relative to the S&P 500. Quant hedge funds AQR and D.E. Shaw are currently among the top 5 holders of the stock in Insider Monkey’s database.