Should You Forget Johnson & Johnson and Buy This Magnificent High-Yield Dividend Stock Instead?

Key Points

• Johnson & Johnson is a Dividend King.

• The stock offers an attractive 3.4% dividend yield.

• Another healthcare stock has a 7.4% yield and four decades of annual dividend increases behind it.

Johnson & Johnson (NYSE: JNJ) is a storied company that has an incredible track record of returning value to investors over time via dividend increases. And the yield is attractive today at 3.4%. But if you are a dividend investor looking to maximize the income your portfolio generates, there could be a more attractive option out there for you yielding more than twice as much as J&J.

There's a lot to like about Johnson & Johnson

The first thing to make clear is that Johnson & Johnson is a very well-run company. And it offers a lot of positives for dividend investors. For example, the 3.4% dividend yield on offer from this healthcare giant is well above the roughly 1.3% you would get from an S&P 500 index (SNPINDEX: ^GSPC) fund. And it is also well above the nearly 1.8% yield you would get from the average healthcare stock.

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In addition to the lofty yield, J&J's dividend has been increased annually for more than six decades. That's an incredible streak which speaks to a company that has a strong business model that is being executed well in both good times and bad. You don't achieve Dividend King status by accident. The one big negative right now is a legal issue around talcum powder that J&J sold. For some investors, the uncertainty around this legal issue might put them off, but that uncertainty is also what has helped lead to the high yield.

It would be hard to suggest that buying J&J would be a huge mistake. But what if your main goal was to maximize the income your portfolio generates? In that case, you might want to examine Universal Health Realty Income Trust (NYSE: UHT) and its lofty 7.4% dividend yield.

Universal Health Realty Income Trust is basically a bespoke REIT

For starters, Universal Health Realty Income Trust is a real estate investment trust (REIT), which is different from J&J, which makes pharmaceutical and medical devices. But the properties the REIT owns are healthcare properties, so they do fall into the same general investing space. And given that its yield is more than twice as large as J&J's yield, it might be worth a closer look.

One key factor here is that Universal Health Realty Income Trust has increased its dividend annually for four decades. While that isn't enough to make it a Dividend King, like J&J, it is a very impressive dividend record. The dividend was just increased again in June 2025. That's backed by a portfolio of around 75 properties spread across various U.S. markets.

The properties Universal Health Realty Income Trust owns are largely medical offices, but it also owns acute care hospitals and behavioral care centers, among other things. That said, the REIT is run by its largest tenant, Universal Health Services (NYSE: UHS). That relationship does insert some management risks, but given the long string of dividend increases it appears that income investors have been well rewarded over time. And given the high dividend yield, it might be well worth taking on this management risk.

That said, there is one notable issue that investors need to keep in mind. The lofty yield here will likely make up the lion's share of total return over time. This is highlighted by the fact that Universal Health Realty Income Trust's dividend growth rate over the past decade has averaged around 1.5%. That compares to J&J's dividend growth rate over the same time of roughly 5% a year.

What are you looking for in a dividend stock?

Buying Universal Health Realty Income Trust is about yield, not growth. Investors need to make sure they understand that fact very clearly when they compare it to Johnson & Johnson, which offers a much lower yield combined with much better growth prospects. However, if you are retired and looking to maximize the income you are generating from your portfolio right now, switching from J&J to Universal Health Realty Income Trust could more than double your dividend income stream. That might be worth the switch for a lot of investors.

Should you invest $1,000 in Johnson & Johnson right now?

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Reuben Gregg Brewer has no position in any of the stocks mentioned. The Motley Fool recommends Johnson & Johnson. The Motley Fool has a disclosure policy.