I Think Johnson & Johnson Is the Best Dividend Stock to Buy Right Now

There are plenty of excellent dividend stocks, but right now, Johnson & Johnson (NYSE: JNJ) stands out. The healthcare leader has a rock-solid business, and recent developments have made the stock even more attractive. Here's more on what makes Johnson & Johnson such an attractive dividend stock.

What I look for in a dividend stock

Every investor has different goals, levels of risk tolerance, and starting capital. So they won't all gravitate toward the same companies. Still, there is significant overlap in the qualities investors look for in dividend stocks. For me, one of the most important criteria is the underlying business's financial health. Any other factor matters little if the corporation faces severe challenges that it is unlikely to overcome. That often leads to dividend cuts, or worse, the company may even stop paying dividends for a while. Another important thing I look for is a corporation's dividend track record.

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Having consistently paid and raised dividends for a long time is no guarantee that a company will continue doing so. But it tells us something about management's capital allocation priorities. It is also a proxy for the company's ability to navigate challenging economic conditions while maintaining its dividend program. Two other things I look at are the company's dividend yield (one that's too low or too high can be a problem) and its payout ratio, which can indicate whether a company has enough financial flexibility to continue raising its dividend. It's critical for me to consider all these factors (and others) together. They are more useful as a whole rather than as isolated metrics.

How Johnson & Johnson fares

Johnson & Johnson has a high score in every single one of those categories. Let's start with the most important: The company's underlying business. Johnson & Johnson has one of the more diversified healthcare operations I have seen anywhere on the market. The company's pharmaceutical segment is already quite vast, with medicines across oncology, immunology, infectious diseases, neuroscience, and more. But Johnson & Johnson also has a fairly large, diversified medical device segment. So, even when it encounters troubles in some parts of the business, the rest can pick up the slack.

Johnson & Johnson is demonstrating that right now. Last year, it lost patent exclusivity for Stelara, an immunosuppressant, in the U.S. (Stelara's patent cliff in Europe came in 2024). This wasn't an insignificant loss. In 2024, Stelara made up almost 12% of the company's net sales. However, the healthcare leader has expertly navigated this patent cliff. Johnson & Johnson expects $100.6 billion in revenue for the full fiscal year 2026 (at the midpoint), representing a year-over-year increase of 6.8%.

That's all the more impressive because the company is facing additional headwinds, including government-led drug price negotiations that are affecting some of its other products. Yet top-line growth remains healthy. That speaks volumes about Johnson & Johnson's underlying business. And there is more. The company boasts an AAA credit rating from S&P Global, the highest rating available and even higher than that of the U.S. government. Now, there has been a significant risk hanging over Johnson & Johnson's head for a long time: the thousands of talc-related lawsuits it has faced.

But the company recently announced that it had moved one giant step closer to resolving most of these lawsuits. It hasn't officially done so yet, but this is great news for Johnson & Johnson and its shareholders, and makes the stock even more attractive. What about the company's dividend track record? Here, too, Johnson & Johnson is impressive. The company is a Dividend King, or a corporation that has a minimum of a 50-year streak of consecutive annual payout increases. This is an elite group, and Johnson & Johnson is one of the more elite among them -- the company's ongoing streak is at 64 years.

There are almost 60 Dividend Kings. Fewer than 10 have a more impressive track record than Johnson & Johnson. Then, we can point to the company's payout ratio, which is just under 47%, and its forward yield of 2% -- that's not exceptional, but it's above the S&P 500's average of 1.1%. Taken together, all these factors show why Johnson & Johnson is my favorite dividend stock to buy right now. I already own the company's shares, and I don't intend to reduce my position anytime soon.

Prosper Junior Bakiny has positions in Johnson & Johnson. The Motley Fool recommends Johnson & Johnson. The Motley Fool has a disclosure policy.