Is Johnson & Johnson a Good Dividend Stock to Buy Now?

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Over the past few decades, I’ve noticed that investors often favored Johnson & Johnson’s (JNJ -1.06%) stock for its promise of consistent returns. However, upon examination of its post-COVID-19 performance, it appears that steady gains might have been more of a hope than a reality for these investors.

By the time trading ended on Tuesday, July 15, Johnson & Johnson (J&J) shares had dropped approximately 7.5% since the start of the year and were around 17% lower than their record high from 2022. However, these recent stock price fluctuations seem to contradict the company’s performance. In fact, when announcing their second-quarter results before the market opened on July 16, the management boosted their sales forecast for the entire year.

Johnson & Johnson’s stock price has dropped from its highest point in 2022, but upon closer inspection, its performance might surprise you. In 2023, shareholders received shares of Kenvue, formerly the corporation’s consumer health division, as part of their holdings. Additionally, this April marked the 63rd consecutive year that the company increased its dividend payout.

Instead of focusing on J&J’s performance up until mid-2025, let’s scrutinize their current standing as a potential high-yield stock for investment.

Reasons to buy Johnson & Johnson stock now

The most recent boost in dividends by the healthcare corporation, amounting to 4.8%, has elevated the quarterly distribution to $1.30 per share. Given current stock prices, this equates to a yield of approximately 3.3%.

The consistent sales of Listerine and Q-tips were dependable, but they didn’t experience rapid increases. Now that Johnson & Johnson has shifted its focus to pharmaceuticals and medical technology as two primary sectors, it appears probable that the company will see steady growth in overall sales, with a projected rate of around 5% to 9% over an extended period.

Although Stelara, a significant drug used for treating psoriasis and Crohn’s disease, has recently lost its patent protection, resulting in increased competition from biosimilars, Johnson & Johnson reported a 4.9% increase in pharmaceutical sales during the second quarter compared to the same period last year. Given that Stelara now accounts for less than 7% of their total revenue, the company can more effortlessly deal with ongoing losses due to competition as its sales of newer products continue to grow.

As an observer, I note that Johnson & Johnson’s diverse product portfolio seems ample enough to compensate for any potential losses from Stelara and maintain growth in earnings. A notable example is Spravato, a drug approved by the FDA last year for treatment-resistant depression. In the first half of 2025, sales for this drug skyrocketed by 48% year over year, reaching an astounding annualized figure of $1.5 billion.

It’s possible that Caplyta, a recently acquired therapy for schizophrenia and bipolar depression by J&J, could experience a significant increase in use by 2026. This month, J&J submitted an application aiming to establish it as a preferred treatment for preventing relapses of schizophrenia. In a trial backing this application, patients using Caplyta saw a 63% decrease in the likelihood of experiencing a relapse compared to those on a placebo.

In simpler terms, the protection for selling medical technology lasts significantly longer than it does for drugs. The upcoming robotic surgical system from Johnson & Johnson could potentially serve as a long-term catalyst for their growth, enhancing their profits over a prolonged period.

In April, surgeons carried out the initial procedures for a clinical trial involving the Ottava Robotic Surgical System. Given the strong presence of Intuitive Surgical, it won’t be an easy task to compete. However, with substantial resources at its disposal, Johnson & Johnson has a promising opportunity to capture a substantial portion of the profitable robotic surgical market.

Despite Ottava’s absence, the second-quarter MedTech sales increased by 7.3% compared to the same period last year. Given that aging populations in developed countries will require numerous cardiovascular treatments and hip replacements over the coming decades, it seems logical that we can anticipate steady growth at our current rate, given our leadership positions in these specialized areas.

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Don’t expect huge gains

Pharmaceutical companies find themselves in a complex situation, as the lifespan of their intellectual properties often leads to conflicting interests within the organization.

In the year 2024, Stelara contributed nearly 11.7% of the company’s overall income, marking its current largest patent expiration challenge. Meanwhile, Darzalex, a treatment for multiple myeloma, contributes approximately 14.9% to the total revenue. The key patents safeguarding the U.S. market exclusivity for Darzalex will expire in the year 2029.

In simpler terms, it’s unlikely that total sales growth will exceed 10% annually in the long term for both Stelara and Darzalex due to their current losses. However, we can anticipate a positive trend with growth in the range of 7-9% per year. Notably, Johnson & Johnson recently announced successful clinical trial results for more than a dozen potential new drugs. These could lead to new drug approvals or expanded treatment options for existing patients.

If you value consistent, increasing dividends, this stock might be ideal for you. However, if your goal is swift capital growth, you might want to continue your search.

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2025-07-17 18:54