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Has Johnson & Johnson Been Able to Increase Dividends?

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Johnson & Johnson

In this final part of the series, we’ll take a look at Johnson & Johnson (JNJ). The company’s sales to customers for the first half 2017 rose 2.0%. The US Consumer, International Pharmaceuticals, and Medical Devices sectors drove this growth. EPS (earnings per share) for the first half of 2017 fell 0.70% on higher selling, marketing, and administrative expenses and research and development (R&D) expenses. The company raised its 2017 sales and adjusted EPS guidance due to the strength of its pharmaceutical pipeline and strategic acquisitions.

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The 3.0% sales growth in fiscal 2016 was driven by the US Consumer, Pharmaceuticals, and US Medical Devices segments. EPS rose 8.0%, driven by sales, lower operating expenses, R&D expenses, interest and restructuring expenses, and a lower number of shares outstanding. Johnson & Johnson paid 0.53% of its earnings as dividends in 2016 compared to 0.54% in 2015. It paid 0.50% and 0.60% of its earnings as dividends in 1Q17 and 2Q17, respectively.

Johnson & Johnson has had consistent growth in its dividend payments. It has maintained a strong free cash flow position and a low debt-to-equity ratio. It has been able to improve its strong cash and short-term investment position over the years.

Week ended July 28, 2017

The Dow Jones Industrial Average Index (or DJIA) (DJIA-INDEX) ended the week in the green, rising 0.15%. The S&P 500 (SPY) (SPX-INDEX) and the Nasdaq (COMP-INDEX) fell 0.13% and 0.12%, respectively. The performance of the DJIA was mainly driven by the rallies of Boeing (BA) and Verizon (VZ) after their impressive financial results. Coca-Cola (KO) and Ford (F) also had impressive performances. However, technology-dominated indexes such as the NASDAQ and the S&P 500 were hammered, driven by technology stocks. In its July 2017 meeting, the Fed kept the interest rate intact following low inflation, so the indexes are counting heavily on the earnings season and President Donald Trump’s proposed tax policy changes.

The PowerShares S&P 500 High Dividend ETF (SPHD) offers a dividend yield of 3.7% at a PE (price-to-earnings) ratio of 15.1x. It has the highest exposure to utilities. The iShares Core High Dividend (HDV) offers a dividend yield of 3.3% at a PE ratio of 20.1x. It has the highest exposure to the consumer non-cyclical sector.

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