This Healthcare Stock Barely Flinches During Market Sell-Offs

Johnson & Johnson (NYSE: JNJ), since its 2023 spinoff of its consumer health division into Kenvue (NYSE: KVUE), no longer sells bandages. However, if you're looking to salve your financial wounds, the stock remains a buy. No stock is recession-proof, but the healthcare giant is known for weathering economic storms better than most stocks.

During the Great Recession from December 2007 to June 2009, the S&P 500 index's total return was negative 33%. Johnson & Johnson's total return was only negative 13.9%. After the start of the COVID-19 pandemic triggered a steep stock market slump in early 2020, Johnson & Johnson stock's total return recovered completely by early May, while the S&P 500's total return was still down more than 14%.

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Its dividend is a source of strength

The stock is popular in part because of its reliable dividend, which the company has raised for 63 consecutive years. That rates it a spot on the list of Dividend Kings, those select few companies that have raised their payouts for at least 50 consecutive years. Its latest hike -- a 4.8% bump in 2025 -- brought the quarterly distribution to $1.30 a share, giving it a yield of around 2.1% at the current share price.

Over the past decade, Johnson & Johnson's annual revenues have risen by more than 30% and its annual earnings per share (EPS) are up by more than 86%. In 2025, the company reported revenue of $94.2 billion, up 6%, and EPS of $11.03, up 90.5%, thanks in part to the absence of one-time charges related to the Kenvue spinoff that it experienced in 2024.

It wasn't just the lack of one-time charges that drove its improved profitability, though. The company has 28 platforms, including 15 drugs, that generate $1 billion or more each in annual sales. So, while sales for the immunology drug Stelara dropped 41% and blood cancer therapy Imbruvica revenue fell 7%, those declines were more than offset by the rise of other drugs, particularly multiple myeloma therapy Carvykti, sales of which jumped 96%.

That kind of financial strength means that Johnson & Johnson will likely raise its dividend again this year. Its payout ratio is reasonable at 46.5%.

There are some concerns

Given Johnson & Johnson's strong financials, its stock would likely be trading at a higher valuation than 21 times earnings were it not for two looming concerns.

First, there are still tens of thousands of lawsuits underway against the company from people suing it for selling talcum powder that allegedly contained the carcinogen asbestos. Settling all those lawsuits could cost it between $10 billion and $15 billion, according to some analysts. Second, under the Inflation Reduction Act of 2022, Medicare was for the first time given the right to negotiate on prices for some expensive and widely used drugs. This year, the government will begin paying those lower prices for 10 drugs, among them Johnson & Johnson's anti-inflammatory drug Stelara and its blood thinner Xarelto. That will certainly cut into those treatments' margins.

Size, scope, and spending keep J&J atop the pharma sector

Johnson & Johnson spent $14.6 billion on research and development last year. That's more than many pharmaceutical companies produce in yearly revenue. The company's size helped it achieve 51 drug approvals and 15 new med-tech launches last year. On March 18, the Food and Drug Administration approved Icotyde, a daily plaque psoriasis pill that J&J developed in partnership with Protagonist Therapeutics (NASDAQ: PTGX).

This year, Johnson & Johnson is forecasting adjusted EPS of $11.43 to $11.63, up 6.9% at the midpoint, and revenue of $100 billion to $101 billion, up 6.7% at the midpoint.

Given the company's ability to overcome obstacles, there's a good chance that talc lawsuits, the Inflation Reduction Act, and anything other headwind that might come its way will be small roadblocks on its path to continued growth.

James Halley has positions in Johnson & Johnson. The Motley Fool has positions in and recommends Kenvue. The Motley Fool recommends Johnson & Johnson and Protagonist Therapeutics. The Motley Fool has a disclosure policy.