Dividend Kings In Focus: Kenvue – Sure Dividend

Revealed on November third, 2024 by Felix Martinez

The Dividend Kings are an illustrious group of corporations. They stand aside from the overwhelming majority of the market as a result of they’ve raised dividends for no less than 50 consecutive years.

We consider that traders ought to view the Dividend Kings as essentially the most high-quality dividend development shares to purchase for the long run.

With this in thoughts, we created a full record of all of the Dividend Kings. You’ll be able to obtain the total record, 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 corporations that qualify as a Dividend King.

Kenvue Inc. (KVUE) is the newest addition to the Dividend Kings record, having lately been spun off from former mum or dad firm Johnson & Johnson (JNJ).

This text will analyze Kenvue’s enterprise mannequin, future development 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 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 accommodates merchandise for girls’s well being, wound care, oral care, and child care.

Kenvue’s well-known manufacturers embody Tylenol, Listerine, Band-Support, 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 internet gross sales of $4.0 billion, a slight lower of 0.3% from the earlier yr. Nevertheless, the corporate achieved 1.5% natural development, primarily pushed by pricing methods and product combine modifications, 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 aspects which have enabled additional investments in its world manufacturers, aiming for sustained development.

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 prices. The adjusted working earnings margin remained secure at 22.8%. Moreover, Kenvue incurred a $488 million non-cash impairment associated to its Dr.Ci enterprise, primarily as a result of shifting shopper tendencies in China, though the corporate stays dedicated to the model’s development.

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

Supply: Investor Presentation

Progress Prospects

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

Johnson & Johnson’s 61 consecutive years of dividend development is among the longest available in the market. The corporate is each a Dividend King and a Dividend Aristocrat. We consider that Kenvue’s penchant for dividend development is in its enterprise DNA.

Aggressive Benefits & Recession Efficiency

Kenvue’s former mum or dad firm, Johnson & Johnson, has confirmed to be probably the most profitable corporations at navigating recessions. Although Kenvue not advantages from its mum or dad firm’s diversification, we consider that it might show equally efficient at dealing with financial downturns.

Since Kenvue was a subsidiary of Johnson & Johnson through the Nice Recession of 2008-2009, there is no such thing as a information on its earnings-per-share efficiency throughout that point. Nevertheless, traders can moderately infer that Kenvue would show an identical diploma of resilience throughout recessions as its former mum or dad firm.

The corporate’s merchandise, corresponding to Band-Support and Tylenol, are wanted whatever the state of the economic system as they straight have an effect on customers’ well being and well-being. As trusted merchandise, they wish to proceed to carry out effectively even underneath antagonistic circumstances.

General, Kenvue ought to proceed to lift its dividend for a lot of extra years due to its low payout ratio, respectable 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 few of the industry-leading manufacturers and that its merchandise had been lower-margin companies throughout the mum or dad firm, we now have a goal price-to-earnings ratio of 14 for the inventory. This means a headwind from a number of contraction.

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

Placing all of it collectively, complete returns are anticipated to succeed in 2.1% per yr via 2029. This isn’t a strong anticipated charge of return that makes the inventory a maintain.

Remaining Ideas

Kenvue is a brand new addition to the Dividend Aristocrats record. After a long time as a part of Johnson & Johnson, Kenvue turned an impartial entity. As such, the corporate has produced respectable outcomes.

Whereas we discover the legacy enterprise recession-resistant and the excessive dividend yield enticing for earnings traders, the whole return profile just isn’t excessive sufficient for a purchase advice. We charge KVUE inventory a maintain.

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

In the event you’re on the lookout for shares with distinctive dividend traits, contemplate the next Positive Dividend databases:

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