For investors looking for steady passive income, a methodical selection process is needed. One good technique focuses on companies that provide a good dividend now and also have the fundamental financial soundness to maintain and possibly raise those payments in the future. This method favors stocks with high dividend ratings, which assess yield, growth, and reliability, while also demanding adequate scores in earnings power and balance sheet condition. This confirms the dividend is backed by a solid and stable business, instead of being a temporary sign of a troubled company.
A leading candidate from this kind of filter is healthcare leader Johnson & Johnson (NYSE:JNJ). The company's basic financial picture shows why it regularly scores well for dividend-oriented plans, mixing a good payout with outstanding corporate strength.
A High-Quality Dividend Profile
JNJ’s attraction for income investors is based on a dividend record that demonstrates consistency and expansion. The company is a distinguished "Dividend Aristocrat," having raised its yearly payment for more than sixty straight years. This history is a strong sign of management's dedication to giving capital back to shareholders during different economic periods. The present dividend yield is near 2.29%, which is good next to the wider S&P 500 average and most of its pharmaceutical industry competitors.
Important parts of its dividend quality are:
- Consistent Expansion: The dividend has increased at an average yearly pace above 9% in the last several years.
- Sector Advantage: The yield is better than over 90% of firms in its industry.
- Established History: With at least 10 years of steady and non-decreasing payments, JNJ provides a lot of predictability for income portfolios.
This excellent past is exactly why filtering for a high dividend rating is important, it finds companies with a confirmed practice of shareholder returns, not just a currently high yield.
Backed by Strong Profitability
A lasting dividend needs to be paid for by a profitable company, and here JNJ performs very well. The company gets a high ChartMill Profitability Rating of 8, showing its skill in efficiently turning revenue into profit. This solid earnings power supplies the necessary cash to easily pay for the dividend.
Key measures supporting this are:
- Good Margins: JNJ keeps notable profit (27.26%) and operating (27.00%) margins, placing it with the best in its field. These margins have improved in recent years.
- High Returns: The company produces a strong Return on Equity (31.69%) and Return on Invested Capital (14.16%), showing management's productive use of shareholder money.
For the dividend selection plan, this earnings power is essential. It makes sure the payout is not a burden on the company but is a distribution of real surplus profits, greatly lowering the chance of a future reduction.
Based on Good Financial Condition
While JNJ’s ChartMill Health Rating of 6 points to some items to watch, its complete stability picture stays firm, a main filter in the selection process to steer clear of financially weak companies. The health rating notes very good long-term steadiness with small short-term cash considerations.
The financial condition review shows:
- Firm Stability: JNJ has a very workable debt amount, with a good Debt-to-Free-Cash-Flow ratio of 2.34. Its Altman-Z score of 5.17 shows a very small short-term chance of financial trouble.
- Cash Observation: The company's current and quick ratios are below some industry competitors, which is typical for big, steady firms with efficient cash handling. However, its large profitability and firm stability position lessen worries about meeting duties.
Adding a health filter to the dividend screen is critical to avoid "value traps," companies with high yields that are really a signal of balance sheet pressure. JNJ’s picture confirms its dividend is supported by a very strong balance sheet.
Valuation and Expansion Setting
From a price standpoint, JNJ trades at a Price-to-Earnings ratio that is sensible next to both its own past range and the wider market. While not very inexpensive, its price seems fair considering its quality, steadiness, and dependable income flow. Analysts expect a small rise in both profit and sales expansion in the next few years, which could help future dividend raises.
A complete look at all these basic factors is in the full ChartMill Fundamental Analysis Report for JNJ.
Conclusion
Johnson & Johnson stands for the kind of high-grade holding dividend investors frequently want: a company with a famous dedication to its shareholder payment, supported by top-tier profitability and a fundamentally healthy financial setup. The selection process that finds such a stock, focusing on high dividend ratings along with adequate profitability and health, is made to find businesses made for the long term, not just the present quarter.
For investors aiming to create or add to a portfolio centered on lasting income, JNJ deserves serious thought as a central holding. Its mix of yield, growth, and security is uncommon in the market.
Find Other Dividend Options: The review of Johnson & Johnson came from a methodical filter for high-grade dividend payers. You can see the full list of stocks that now meet similar strict standards by checking the Best Dividend Stocks screen on ChartMill.
,
Disclaimer: This article is for informational purposes only and does not constitute financial advice, a recommendation, or an offer to buy or sell any security. All investments involve risk, including the potential loss of principal. Investors should conduct their own due diligence and consult with a qualified financial advisor before making any investment decisions.
