Dividend Kings In Focus: Kenvue – Positive Dividend

Revealed on November third, 2024 by Felix Martinez

The Dividend Kings are an illustrious group of firms. They stand aside from the overwhelming majority of the market as a result of they’ve raised dividends for at the very least 50 consecutive years.

We consider that buyers ought to view the Dividend Kings as probably the most high-quality dividend progress shares to purchase for the long run.

With this in thoughts, we created a full checklist of all of the Dividend Kings. You may obtain the total checklist, together with necessary monetary metrics corresponding to dividend yields and price-to-earnings ratios, by clicking the hyperlink under:

This group is so unique that there are simply 53 firms that qualify as a Dividend King.

Kenvue Inc. (KVUE) is the latest addition to the Dividend Kings checklist, having lately been spun off from former mum or dad 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 client 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 consists of cough, chilly, allergy, smoking cessation, and ache care merchandise amongst others. Pores and skin Well being and Magnificence holds merchandise corresponding to face, physique, hair, and solar care. Important Well being comprises merchandise for ladies’s well being, wound care, oral care, and child care.

Kenvue’s well-known manufacturers embody Tylenol, Listerine, Band-Assist, Neutrogena, Nicorette, and Zyrtec. These companies contributed roughly 17% of Johnson & Johnson’s annual income.

The corporate reported its monetary outcomes for the second quarter of 2024, revealing web gross sales of $4.0 billion, a slight lower of 0.3% from the earlier yr. Nonetheless, the corporate achieved 1.5% natural progress, primarily pushed by pricing methods and product combine adjustments, offset by minor declines in quantity, significantly in Pores and skin Well being and Magnificence and Self Care segments. Kenvue’s diluted earnings per share (EPS) stood at $0.03, with an adjusted EPS of $0.32. The corporate highlighted productiveness positive factors which have enabled additional investments in its international manufacturers, aiming for sustained progress.

Gross revenue margin improved considerably to 59.1%, up from 55.5% within the prior yr, as a result of enhanced provide chain efficiencies and pricing methods. Nonetheless, the working earnings margin dropped sharply to three.9% from 17.5%, attributed to asset impairments, model investments, and restructuring fees. The adjusted working earnings margin remained steady at 22.8%. Moreover, Kenvue incurred a $488 million non-cash impairment associated to its Dr.Ci enterprise, primarily as a result of shifting client tendencies in China, though the corporate stays dedicated to the model’s progress.

For the total yr 2024, Kenvue reaffirms its outlook, anticipating web gross sales progress of 1.0% to three.0% and adjusted diluted EPS between $1.10 and $1.20. The efficient tax price for the quarter was notably decrease at 10.8% as a result of deferred tax changes from the asset impairment. Kenvue’s continued concentrate on optimizing operations and model funding helps its purpose of reworking right into a extra agile, growth-oriented group, with promising indicators of progress towards its long-term aims.

Supply: Investor Presentation

Development Prospects

Johnson & Johnson produced annual earnings progress of seven% from 2013 to 2022, as the corporate’s diversification allowed it to be one of many extra steady firms within the market. Kenvue consists of simply the buyer merchandise companies, which frequently produce the bottom ranges of progress. Subsequently, we anticipate Kenvue to develop earnings-per-share by 3% yearly by 2029.

Johnson & Johnson’s 61 consecutive years of dividend progress is without doubt one of the longest out there. The corporate is each a Dividend King and a Dividend Aristocrat. We consider that Kenvue’s penchant for dividend progress is in its enterprise DNA.

Aggressive Benefits & Recession Efficiency

Kenvue’s former mum or dad firm, Johnson & Johnson, has confirmed to be some of the profitable firms at navigating recessions. Although Kenvue not advantages from its mum or dad firm’s diversification, we consider that it will 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 is no such thing as a knowledge 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 mum or dad firm.

The corporate’s merchandise, corresponding to Band-Assist and Tylenol, are wanted whatever the state of the economic system as they immediately have an effect on customers’ well being and well-being. As trusted merchandise, they want to proceed to carry out nicely even beneath antagonistic situations.

General, Kenvue ought to proceed to lift its dividend for a lot of extra years because of its low payout ratio, first rate recession resilience, and wholesome steadiness sheet.

Valuation & Anticipated Returns

We anticipate Kenvue to generate adjusted earnings-per-share of $1.15 for 2024. Subsequently, Kenvue shares presently commerce for a price-to-earnings ratio of 19.9. For context, Johnson & Johnson shares have had a median price-to-earner ratio of near 19 since 2013.

Countering the truth that Kenvue holds a number of the industry-leading manufacturers and that its merchandise had been lower-margin companies throughout the mum or dad firm, now we have a goal price-to-earnings ratio of 14 for the inventory. This suggests a headwind from a number of contraction.

Subsequently, if the inventory had been to succeed in our goal a number of by 2029, valuation may scale back annual returns by 4.5%. EPS progress (estimated at 3% per yr) and dividends will generate optimistic returns.

Placing all of it collectively, whole returns are anticipated to succeed in 2.1% per yr by 2029. This isn’t a stable anticipated price of return that makes the inventory a maintain.

Remaining Ideas

Kenvue is a brand new addition to the Dividend Aristocrats checklist. After many years as a part of Johnson & Johnson, Kenvue grew to become an impartial entity. As such, the corporate has produced first rate outcomes.

Whereas we discover the legacy enterprise recession-resistant and the excessive dividend yield engaging for earnings buyers, the whole return profile is just not excessive sufficient for a purchase advice. We price KVUE inventory a maintain.

Moreover, the next Positive Dividend databases comprise probably 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 won’t qualify as Dividend Aristocrats.
The Finest DRIP Shares: The highest 15 Dividend Aristocrats with no-fee dividend reinvestment plans.

If you happen to’re in search of shares with distinctive dividend traits, contemplate the next Positive Dividend databases:

The most important home inventory market indices are one other stable useful resource for locating funding concepts. Positive Dividend compiles the next inventory market databases and updates them month-to-month: