Dividend Aristocrats In Focus: Kenvue

Printed on November twenty first, 2023 by Bob Ciura

The Dividend Aristocrats encompass 68 corporations within the S&P 500 Index which have raised their dividends for at the least 25 years in a row. Lots of the corporations have become big multinational firms over the many years.

You may see the total checklist of all 68 Dividend Aristocrats right here.

We created a full checklist of all Dividend Aristocrats, together with essential monetary metrics like price-to-earnings ratios and dividend yields. You may obtain your copy of the Dividend Aristocrats checklist by clicking on the hyperlink under:

Kenvue Inc. (KVUE) is the latest addition to the Dividend Aristocrats checklist, having lately been spun off from former mother or father 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 Could 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 akin to face, physique, hair, and solar care. Important Well being accommodates merchandise for girls’s well being, wound care, oral care, and child care.

Nicely-known manufacturers in Kenvue’s product line up embody 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 sweetness additionally confirmed beneficial properties. Gross revenue margin improved 140 foundation factors to 57.5%.

Kenvue additionally supplied an up to date outlook for 2023. The corporate now expects income development to be in a variety of 4.0% to 4.5% and natural development 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 variety of $1.26 to $1.28 for the 12 months.

Development Prospects

Johnson & Johnson produced annual earnings development of seven% for the 2013 to 2022 interval as the corporate’s diversification allowed it to be one of many extra secure corporations out there place. Kenvue consists of simply the buyer merchandise companies, which had been usually produced the bottom ranges of development. Subsequently, we anticipate that Kenvue will develop earnings-per-share by 3% yearly by means of 2028.

Johnson & Johnson’s dividend development streak of 61 consecutive years is among the longest out there place. The corporate is each a Dividend King and a Dividend Aristocrat. We imagine that penchant for dividend development is in Kenvue’s enterprise DNA.

Aggressive Benefits & Recession Efficiency

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

Since Kenvue was a subsidiary of Johnson & Johnson through the Nice Recession of 2008-2009, there isn’t any information on its earnings-per-share efficiency throughout that point. Nonetheless, buyers can moderately infer that Kenvue would show an identical diploma of resilience throughout recessions as its former mother or father firm.

The corporate’s merchandise, akin to Band-Support and Tylenol, are wanted whatever the state of the financial system as they deal instantly with customers’ well being and well-being. As trusted merchandise, they want proceed to carry out effectively even underneath opposed situations.

General, Kenvue ought to proceed to boost its dividend for a lot of extra years because of its low payout ratio, its first rate resilience to recessions, and its wholesome steadiness 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 15.6. For context, Johnson & Johnson shares have a median price-to-earnings ratio of near 19 since 2013.

Countering the truth that Kenvue holds a number of the trade main manufacturers with that its merchandise had been the decrease margin companies inside the mother or father firm, we’ve a goal price-to-earnings ratio of 14 for the inventory. This suggests a headwind from a number of contraction.

Subsequently, valuation might scale back annual returns by 2.1% if the inventory had been to succeed in our goal a number of by 2028. Constructive returns will probably be generated by EPS development (estimated at 3% per 12 months) 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 4.9% per 12 months by means of 2028. It is a strong anticipated fee of return that makes the inventory a maintain, however not a purchase at the moment.

Ultimate 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 early within the second quarter. The corporate has produced first rate outcomes as far as an impartial firm.

Whereas we discover the legacy enterprise to be recession-resistant and the excessive dividend yield to be engaging for earnings buyers, the entire return profile isn’t excessive sufficient for a purchase advice. We fee KVUE inventory to be 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 Finest DRIP Shares: The highest 15 Dividend Aristocrats with no-fee dividend reinvestment plans.

When you’re on the lookout for shares with distinctive dividend traits, take into account the next Positive Dividend databases:

The key 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: