He didn’t have to do that to maintain his status as a Dividend Aristocrat. He did it because he could and the shareholders liked him.
On Wednesday, J&J (ticker: JNJ) Updated After the financial instructions are completed Exchange offer b
Kenvu
(KVUE) stock. J&J bought about 191 million of its own shares for the 1.5 billion Kenvu shares it owns. Kenvue raised funds through a public offering in early May.
J&J is a Dividend Aristocrat, included in the S&P 500 Dividend Aristocrats index, which includes companies that have raised their payouts for at least 25 consecutive years. When a noble separates a business,
S&P Global
(SPGI) looks at payments from merged entities for two years to make sure payments are still adding up.
Kenvue has already announced its first dividend of 20 cents. That said, in theory, JNJ could have maintained its Dividend Aristocrat status by reducing its quarterly payout a little.
Investors were not required to participate in the exchange offering. Therefore, a non-participant could see a reduced dividend on their J&J holdings. They may not care about Aristocrat status if payments fall by the nickel or quarter.
But even if J&J adjusted the dividend, it wasn’t wrong for the investor not to participate in the change. A person who did not participate in the exchange now owns a slightly larger percentage of J&J. The company reduced its stock count by taking J&J shares and passing on Kenvway’s stock. Moreover, J&J still holds some Kenvue shares because not everyone participated in the exchange offer.
But J&J owners needn’t worry about anything. J&J simply continues to pay $1.19 a quarter for now. That costs the company $11 to $12 billion a year. No sweat. Wall Street projects J&J will generate about $26 billion in free cash flow by 2024, according to FactSet.
Dividends account for less than half of free cash flow. That is not a heavy burden. The average payout ratio of all dividend payers in the S&P 500 is about 50%.
Since its IPO in early May, Kenvi’s stock is up about 4%. J&J shares are down 2% over the same period. of
S&P 500
And
Dow Jones Industrial Average
They are about 10% and 4%.
Dividend payers have been out of favor lately. of
ProShares S&P 500 Dividend Aristocrats ETF
( NOBL ) is up about 5% year to date, trailing the S&P 500 by 12 percentage points.
Write to Al Root at [email protected]
