Johnson & Johnson (JNJ) Hikes Quarterly Dividend, But Cuts Its Full-Year Guidance

If ever there were a company that should be doing well, even in a structured environment like the one we're all facing right now, Johnson & Johnson (NYSE: JNJ) should be around the top of the list. Most of its product line is “essential,” it's been working to develop a vaccine to stop coronavirus, the disease that's crippled our economy, and it's got name recognition going back over a century. Yet what's emerged from Johnson & Johnson recently can best be described as merely a mixed bag.

The Good News is Plenty Good

To lead in with the good news, Johnson & Johnson has just made itself that much more attractive on news that it hiked its quarterly dividend. On a percentage basis, it's a pretty healthy hike, too, up from $0.95 to $1.01. That's 6.3% more than it was.

Good news by itself, especially in an environment where many companies have suspended dividends in order to marshal ready cash to take on the uncertainty of the market ahead. That wasn't all the good news Johnson & Johnson had to bring to bear, though; it also beat quarterly earnings and revenue. While Refinitiv analysts were expecting $2 per share earnings, Johnson & Johnson delivered $2.30 per share, adjusted. Expectations were for $19.47 billion in revenue, and Johnson & Johnson put paid to that figure as well, bringing in $20.7 billion.

That kind of good news, in an environment fairly starved for the stuff, gave Johnson & Johnson a 3% boost in premarket trading, and that boost is carrying on with the stock at $145.31 as of this writing. That's well off its close yesterday at $139.95.

Better yet, the company clearly has the force of confidence on its side, as it's the first drugmaker in the US to report earnings following the first appearance of COVID-19. That confidence was reflected in some of its other numbers, including from its consumer unit, which brought in $3.6 billion in revenue, up 9.2% from the previous year.

But There's Always a Downside

As is so often the case in life, all that good news did come with some downside connected to it. While the company beat earnings for this quarter, it cut its full-year adjusted earnings projections down to $7.50-$7.90 per share, down significantly from the original counts of $8.95-$9.10.

Medical device sales fell a shocking 8.2%, down to $5.9 billion as pretty much any medical procedure not either an emergency or directly related to the coronavirus was shut down. The company was expecting elective procedures to drop between 65 and 80% for the second quarter, and the first week alone suggested that the company hasn't overestimated.

The flood of good news out of the company has helped, but even Johnson & Johnson couldn't buck the hit on this altogether; while shares are up about 2% over the last 12 months, they're still down about 4% against this time last year.

Setting Up the Future, With Caveats

While things might look a bit shaky right now thanks to the ongoing shutdown mess that coronavirus has wrought, there are also some bright points on the horizon. Johnson & Johnson expects to start human testing on its coronavirus vaccine by September, with the potential for emergency use early next year. Moreover, it's also invested $1 billion as part of an effort with the government's Biomedical Advanced Research and Development Authority to drive further vaccine research.

Basically, things are looking pretty bright at Johnson & Johnson. It took an early lead in earnings announcements and brought impressive numbers to the table. While it's going to get hit by the coronavirus like pretty much every other company around, the combination of diversification and healthcare focus give it a very stable platform from which to operate. That's a big deal by virtually any standard. There are certainly problems facing the company, but it's visibly working against them, and that should bolster confidence too.

The biggest development by far, meanwhile, has to be the dividend. By not only keeping up its dividend, but also raising it, in times that some project will be the worst since not the Great Recession, but the full-on Great Depression, is a significant development. This is likely to pull a lot of interest, and investment, toward Johnson & Johnson. That should in turn keep that stock price high, that dividend working, and a lot of valuable consumer products on shelves.