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Revealed on November twenty eighth, 2023 by Bob Ciura
The Dividend Kings are an illustrious group of corporations. These corporations stand other than the overwhelming majority of the market as they’ve raised dividends for a minimum of 50 consecutive years.
We consider that buyers ought to view the Dividend Kings as essentially the most high-quality dividend progress shares to purchase for the long run.
With this in thoughts, we created a full listing of all of the Dividend Kings. You’ll be able to obtain the total listing, together with necessary monetary metrics reminiscent of dividend yields and price-to-earnings ratios, by clicking the hyperlink beneath:
This group is so unique that there are simply 54 corporations that qualify as a Dividend King.
Kenvue Inc. (KVUE) is the latest addition to the Dividend Kings listing, having not too long ago been spun off from former guardian firm Johnson & Johnson (JNJ).
This text will analyze Kenvue’s enterprise mannequin, future progress catalysts, and anticipated returns.
Enterprise Overview
Kenvue operates within the healthcare sector as a shopper merchandise producer. In Might 2023, Kenvue was spun off from Johnson & Johnson. Now, Kenvue operates three segments: Self Care, Pores and skin Well being and Magnificence, and Important Well being.
Self Care’s product portfolio contains cough, chilly, allergy, smoking cessation, and ache care merchandise amongst others. Pores and skin Well being and Magnificence holds merchandise reminiscent of face, physique, hair, and solar care. Important Well being comprises merchandise for girls’s well being, wound care, oral care, and child care.
Properly-known manufacturers in Kenvue’s product line up embrace Tylenol, Listerine, Band-Support, Neutrogena, Nicorette, and Zyrtec. These companies contributed roughly 17% of Johnson & Johnson’s annual income.
On October twenty sixth, 2023, Kenvue reported third quarter earnings outcomes for the interval ending October 1st, 2023. Income grew 3.4% to $3.92 billion, which was $10 million above estimates.
Supply: Investor Presentation
Adjusted earnings-per-share of $0.31 was in-line with expectations. Natural gross sales grew 3.6% as pricing and blend had been partially offset by a 3.5% decline in quantity. Chilly and cough had been once more robust whereas pores and skin, well being, and wonder additionally confirmed positive aspects. Gross revenue margin improved 140 foundation factors to 57.5%.
Kenvue additionally offered an up to date outlook for 2023. The corporate now expects income progress to be in a spread of 4.0% to 4.5% and natural progress of 5.5% to six.0%, down from 4.5% to five.5% and 5.5% to six.5%, respectively. Kenvue initiatives adjusted earnings-per-share to be in a spread of $1.26 to $1.28 for the yr.
Development Prospects
Johnson & Johnson produced annual earnings progress of seven% for the 2013 to 2022 interval as the corporate’s diversification allowed it to be one of many extra steady corporations out there place. Kenvue consists of simply the buyer merchandise companies, which had been usually produced the bottom ranges of progress. Subsequently, we anticipate that Kenvue will develop earnings-per-share by 3% yearly by 2028.
Johnson & Johnson’s dividend progress streak of 61 consecutive years is among the longest out there place. The corporate is each a Dividend King and a Dividend Aristocrat. We consider that penchant for dividend progress is in Kenvue’s enterprise DNA.
Aggressive Benefits & Recession Efficiency
Kenvue’s former guardian firm Johnson & Johnson has confirmed to be one of the crucial profitable corporations at navigating recessions. Although Kenvue not advantages from its guardian firm’s diversification, we consider that it could show equally efficient at dealing with financial downturns.
Since Kenvue was a subsidiary of Johnson & Johnson in the course of the Nice Recession of 2008-2009, there isn’t any information on its earnings-per-share efficiency throughout that point. Nonetheless, buyers can fairly infer that Kenvue would show the same diploma of resilience throughout recessions as its former guardian firm.
The corporate’s merchandise, reminiscent of Band-Support and Tylenol, are wanted whatever the state of the financial system as they deal straight with customers’ well being and well-being. As trusted merchandise, they want proceed to carry out effectively even beneath hostile circumstances.
Total, Kenvue ought to proceed to lift its dividend for a lot of extra years because of its low payout ratio, its respectable resilience to recessions, and its wholesome stability sheet.
Valuation & Anticipated Returns
We anticipate Kenvue to generate adjusted earnings-per-share of $1.27 for 2023. Subsequently, shares of Kenvue presently commerce for a price-to-earnings ratio of 15.9. For context, Johnson & Johnson shares have a mean price-to-earnings ratio of near 19 since 2013.
Countering the truth that Kenvue holds a few of the trade main manufacturers with that its merchandise had been the decrease margin companies inside the guardian firm, we’ve a goal price-to-earnings ratio of 14 for the inventory. This means a headwind from a number of contraction.
Subsequently, valuation may cut back annual returns by 2.5% if the inventory had been to succeed in our goal a number of by 2028. Constructive returns can be generated by EPS progress (estimated at 3% per yr) and dividends.
On July twentieth, 2023, Kenvue introduced its first-ever quarterly dividend of $0.20 per share to be distributed on September seventh, 2023. The annualized payout of $0.80 per share represents a present yield of 4.0%.
Placing all of it collectively, whole returns are anticipated to succeed in 4.5% per yr by 2028. This can be a stable anticipated price of return that makes the inventory a maintain, however not a purchase right now.
Ultimate Ideas
Kenvue is a brand new addition to the Dividend Aristocrats listing. After a long time as a part of Johnson & Johnson, Kenvue turned an impartial entity early within the second quarter. The corporate has produced respectable outcomes as far as an impartial firm.
Whereas we discover the legacy enterprise to be recession-resistant and the excessive dividend yield to be enticing for earnings buyers, the entire return profile isn’t excessive sufficient for a purchase suggestion. We price KVUE inventory to be a maintain.
Moreover, the next Certain Dividend databases include essentially the most dependable dividend growers in our funding universe:
- The Dividend Champions: Dividend shares with 25+ years of dividend will increase, together with these that will not qualify as Dividend Aristocrats.
- The Finest DRIP Shares: The highest 15 Dividend Aristocrats with no-fee dividend reinvestment plans.
If you happen to’re searching for shares with distinctive dividend traits, think about the next Certain Dividend databases:
The foremost home inventory market indices are one other stable useful resource for locating funding concepts. Certain Dividend compiles the next inventory market databases and updates them month-to-month:
Thanks for studying this text. Please ship any suggestions, corrections, or inquiries to [email protected].
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