#5: Johnson & Johnson
Current Dividend Yield: 3.5%
Performance So Far in 2012: +6%
Johnson & Johnson (NYSE:JNJ) also made the list of Warren Buffett’s favorite dividend stocks, since Berkshire holds some 29 million shares. And with a nice dividend and a footprint in the recession-proof health care biz, it’s easy to see why.
Of course J&J has hit some headwinds in recent years over quality control, calling into question how well-run the company really is. In fact recent Q2 earnings show a lowered outlook and a big dip in profits due to litigation over product recalls. But a new Johnson & Johnson CEO at the helm is changing things and hoping to change all that in the months ahead.
One thing that never has changed, of course, is the dividend potential of Johnson & Johnson. JNJ has raised dividends for 49 years in a row, helping make it a Dependable Dividend Stock. During the past decade, the company has managed to boost distributions by more than 12% per year — all while delivering a headline yield of about 3.5% 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, the stock has seen some underperformance. But even on reduced projections, Johnson & Johnson could see a stunning 45% 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.