#5: Johnson & Johnson
Current Dividend Yield: 3.8%
Performance So Far in 2012: -3%
Johnson & Johnson (NYSE:JNJ) has hit some headwinds in recent years over quality-control issues, calling into question how well-run the company really is. But with a new Johnson & Johnson CEO at the helm, some are hoping that change is in the wind at JNJ. Product recalls have weighed heavily on the company, and consumers and investors alike need confidence for this health care giant to once again win their support.
One thing that never has been uncertain, however, is the dividend potential of Johnson & Johnson. JNJ has raised dividends for 49 years in a row. During the past decade, the company has managed to boost distributions by over 12% per year — all while delivering a headline yield of about 3.6% right now.
And unlike some big pharma stocks that pay nice yields, the biggest dividend driver isn’t prescription drug offerings. While JNJ does offer some vaccines and medical products, consumer health offerings like Band-Aid and Tylenol provide its steadiest revenue stream.
Revenue admittedly has been a bit stagnant at J&J during the past few years. Hence some underperformance. But if you believe projections, Johnson & Johnson could see a stunning 48% jump in earnings per share for fiscal 2012 compared with fiscal 2011. Time will tell if management can hit those targets. But in the meantime, the dividend is a pretty nice hedge even if the stock moves sideways. (Read why InvestorPlace staffer Tom Taulli thinks that the pros outweigh the cons at Johnson & Johnson now.)