Is J&J’s 48-Year Dividend Streak in Jeopardy?

One more item on Johnson & Johnson ($JNJ): The company has raised its dividend for 48 years in a row. Number 49 should come any day now.

The issue is that the company’s earnings haven’t grown very much, so the board probably won’t raise the dividend a lot. Earnings-per-share rose from $4.63 in 2009 to $4.76 in 2010. That’s an increase of 2.8%.

If the board kept the payout ratio constant, that would mean the quarterly dividend would rise from 54 cents per share to roughly 55.5 cents per share.

On one hand, the board certainly feels they need to keep the dividend streak going. On the other hand, they can’t raise the dividend too much. Nearly all the free cash will be going to a possible Synthes deal. On the third hand, a dividend increase of a penny per share will look pretty lame.

I think we’ll see an increase of two or three cents per share. Still, the stock currently yields more than a 10-year Treasury bond.

Of course, they could shock us by foregoing a dividend increase.

Posted by on April 19th, 2011 at 12:21 pm

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