There are few companies out there with an unblemished track record of annual dividend increases that also have pristine financials to ensure that the dividend raises will continue.

Johnson & Johnson (NYSE: JNJ) is unquestionably one of them.

The company has raised its dividend annually since it began paying one in 1972. Last year marked the 50th year in a row that the drug and consumer products company lifted the dividend.

That’s what you call an impressive track record.

Okay, so the dividend-paying history is superb. But so is its cash flow growth.

In 2021, the maker of Band-Aids, medical devices and cancer-fighting drugs, along with many other products, generated $19.8 billion in free cash flow. That figure is expected to grow to $22.9 billion when Johnson & Johnson reports full-year 2022 results and rocket to $26.7 billion this year.

The company is forecast to have paid out $11.5 billion in dividends in 2022, just 50% of its free cash flow. If the 2023 free cash flow and dividends paid projections are correct, this year, the company’s payout ratio will dip to 45%.

I like to see a company’s payout ratio below 75%. So 45% is quite low and suggests the company has lots of room to raise the dividend even if free cash flow isn’t as strong as predicted.

Johnson & Johnson’s dividend is as safe as a bet that most New Year’s resolutions will be forgotten by February.

Dividend Safety Rating: A

— Marc Lichtenfeld

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Source: Wealthy Retirement