The Berkshire Thread (Part 2): Johnson & Johnson (NYSE: JNJ) — The Dividend That Has Never Missed in Over Half a Century

The Stock That Never Leaves

There is a category of company that long-term investors almost never sell. Not because they are the most exciting, or the fastest-growing, or the most talked about on financial media — but because they do something quietly extraordinary: they compound capital through every cycle, every crisis, every structural shift, and they keep paying you more money each year while doing it.

Johnson & Johnson is one of perhaps a dozen companies in the world that qualifies.

The company has raised its dividend every single year for 64 consecutive years as of 2026. To put that in context: this streak started in 1962. It has survived Black Monday, the dot-com crash, the GFC, the COVID-19 pandemic, a multi-decade opioid epidemic, and a rolling talcum powder litigation saga that has consumed billions in legal fees and headlines. The dividend still went up. Every. Single. Year.

That is not just an impressive streak. It is a structural argument. Companies that sustain dividend growth for six-plus decades are not doing it by accident. They are doing it because their cash generation is durable, their balance sheet is disciplined, and their management culture treats the dividend as a non-negotiable commitment to shareholders.

This is the defensive compounder thesis. Not the highest yield in the room. Not the biggest growth story. But the kind of compounding that, over 20 years, quietly turns a modest position into something substantial — while you were barely paying attention.

Arc 2: The Berkshire Thread

Last week, in the first part of this arc, we looked at Coca-Cola (KO) — the holding Warren Buffett has described as one he will never sell, and the clearest articulation of his compounding philosophy in a single stock. The lesson from KO was not about soft drinks. It was about competitive moats, pricing power, and the mathematics of patience.

Johnson & Johnson (JNJ) is not a current Berkshire Hathaway holding — Berkshire built a substantial position in JNJ beginning in Q1 2006, holding approximately 50 million shares at its peak, before gradually reducing and ultimately exiting entirely by Q3 2023. The connection is philosophical rather than current.

JNJ embodies the same set of principles Buffett has articulated for decades: dominant competitive position, durable cash generation, pricing power in a market that cannot easily substitute away from it, and a capital allocation discipline that rewards shareholders consistently. It is the bridge from KO’s personal Buffett lesson to next week’s capstone — Berkshire Hathaway itself, the entity that systematises this philosophy at industrial scale.

By the time we arrive at Part 3 next week, readers will have absorbed two issues of Buffett-adjacent thinking. The lens will be calibrated.

What Is JNJ Today? The Post-Kenvue Company Most Investors Haven’t Updated

Here is the most important thing to understand about JNJ in 2026: the company you’re looking at is not the one you learned about in school.

In May 2023, Johnson & Johnson spun out its entire consumer health division as a separately listed company called Kenvue (KVUE). The separation was completed in full on 23 August 2023, when Kenvue became a fully independent public company. Everything you associate with J&J’s consumer brand — Band-Aid, Tylenol, Neutrogena, Listerine, Aveeno, Benadryl — is now Kenvue’s problem and Kenvue’s upside.

What remained with JNJ is far leaner and, frankly, far more interesting.

Innovative Medicine (formerly the Pharmaceutical segment): This is the engine. USD 60.4 billion in revenue for full-year 2025, growing 6.0% operationally. Key franchises include:

• Darzalex (daratumumab) — a blockbuster in multiple myeloma, consistently growing double-digits
• Erleada (apalutamide) — prostate cancer, strong growth trajectory
• Tremfya (guselkumab) — immunology/psoriasis
• Carvykti — CAR-T cell therapy for myeloma, one of JNJ’s most promising newer assets
• Rybrevant/Lazcluze — lung cancer combination showing compelling trial data

The notable headwind has been Stelara (ustekinumab), JNJ’s former immunology blockbuster, which faced biosimilar competition entering the market from 2023 onwards. The Stelara patent cliff was a widely flagged risk — the Q2 2026 results confirmed that the rest of the portfolio absorbed it. Full-year 2026 guidance has been raised to approximately USD 101.1 billion at the midpoint.

MedTech: USD 33.8 billion in revenue for full-year 2025, growing 6.1%. This covers cardiovascular devices, orthopaedic surgery, vision care, and general surgery. MedTech benefits from long-term demographic tailwinds — an ageing global population that needs more joint replacements, heart procedures, and surgical interventions, year after year.

The result of the Kenvue spin-off is a company with no low-margin consumer products dragging on its blended margins. What remains is two high-margin, high-barrier healthcare businesses with genuine pricing power in markets where customers — hospitals, health systems, oncologists — are not primarily price-sensitive.

The Dividend King: 64 Years and Counting

The “Dividend King” designation is fitting: a company that has increased its annual dividend for 50 or more consecutive years. Only a small number of US companies qualify. JNJ has lapped the minimum requirement 14 times over.

On 14 April 2026, JNJ announced its 64th consecutive annual dividend increase, lifting the quarterly payout from USD 1.30 per share to USD 1.34 per share — a 3.1% increase. At the annualised rate of USD 5.36 per share against a share price of approximately USD 260–263 (as at late July 2026), that represents a dividend yield of roughly 2.0–2.1% in USD terms.

That is not a headline yield. It is not meant to be. The argument for JNJ’s dividend is not current income maximisation — it is the compounding effect of a payout that has been increased without exception for six decades. An investor who purchased JNJ in 2000 at roughly USD 50 per share is now receiving a dividend yield on cost of over 10% annually, without having done anything.

What makes this track record durable? Three structural factors:

• Cash generation depth. JNJ generated USD 25.3 billion in quarterly sales in Q2 2026 alone. Adjusted earnings per share came in at USD 2.90 for the quarter. This is a machine, not a project.
• Balance sheet discipline. Debt-to-equity of approximately 0.68 is conservative for a company of this size. The interest coverage ratio sits at around 23–24x. JNJ does not have a debt problem.
• Segment diversification. When pharma faces a patent cliff (as with Stelara), MedTech can absorb the slack, and vice versa. Two distinct healthcare businesses with independent revenue drivers is a genuine risk buffer — not a marketing claim.

The 64-year streak is not decorative. It is evidence.

The Talc Overhang: What’s Resolved, What Isn’t

This piece would be incomplete without addressing the elephant — or more precisely, the talcum powder.

The allegation: For decades, J&J’s talc-based baby powder contained trace amounts of asbestos, and plaintiffs allege it caused ovarian cancer and mesothelioma in users. J&J denies this and points to FDA testing that found no asbestos contamination, while plaintiff lawyers point to internal documents suggesting the company was aware of risks.

Where it stands today: As of July 2026, approximately 68,435 cases remain in multidistrict litigation (MDL-2738) before Judge Michael Shipp in the US District Court for New Jersey.

J&J has made multiple attempts to resolve this through its “Texas two-step” bankruptcy strategy — creating a subsidiary (LTL Management, later Red River Talc) to hold the talc liability, filing it for bankruptcy, and proposing a large settlement fund. The original offer was USD 6.48 billion (May 2024). After negotiations, the figure rose to approximately USD 8 billion. However, the bankruptcy judge rejected the most recent iteration, collapsing that pathway to resolution.

The litigation is therefore still live. J&J continues to face individual jury verdicts and appeals, while simultaneously negotiating alternative settlement structures.

How to think about this as an investor:
Do not dismiss it — USD 8 billion is real money, and the case count is substantial. But also do not catastrophise. JNJ generated approximately USD 94 billion in revenue in 2025. Even a full USD 8 billion settlement, paid over 25 years as originally structured, is approximately one month’s revenue. The market has had years to price in this overhang. The current share price — up roughly 55–59% over the past 12 months — suggests investors are not viewing the talc litigation as an existential threat.

The honest position: it is a known, bounded liability with meaningful legal uncertainty remaining. Watch it, but it is not the reason to avoid the stock.

The Numbers: JNJ vs Peers

All figures approximate, sourced late July 2026. ABBV TTM P/E is heavily elevated due to amortisation from the 2020 Allergan acquisition; forward P/E is more representative. ABBV consecutive increases are counted from the 2013 spin-off from Abbott.

*ABBV carries negative shareholder equity due to share buybacks and Allergan goodwill. Standard D/E is not meaningful. TTM earnings are distorted by acquisition-related amortisation.
**+12.4% is ABBV’s reported net revenue growth for Q1 2026 (latest reported quarter; Q2 results are scheduled for 31 July 2026).

The read on this table: JNJ sits between two different profiles. ABBV offers a higher yield and solid growth, but its earnings optically look expensive due to acquisition amortisation and its balance sheet has been significantly leveraged. Merck offers a comparable yield and a lower forward multiple in some metrics, but growth has been more muted as Keytruda faces longer-term patent cliff considerations and the pipeline remains under scrutiny.

JNJ’s forward P/E of around 21–22x is not cheap by absolute standards, but relative to 64 years of unbroken dividend growth, a freshly streamlined two-segment structure, and raised full-year guidance of USD 101B+, it is arguably a reasonable price for what you’re buying: durable, compounding, boring capital.

The Aussie Angle: SMSF Income, Withholding Tax, and How to Access It

JNJ sits in more Australian SMSF portfolios than most financial advisers would estimate, and the reason is straightforward: it offers consistent USD-denominated income with very low volatility.

For an SMSF in pension phase — where distributions need to be regular and reliable — JNJ’s dividend profile is close to ideal. The 15% withholding tax on US dividends paid to Australian residents (reduced from the standard 30% under the Australia–US tax treaty, provided a valid W-8BEN form is on file) is manageable. That USD 5.36 per share annual dividend nets to approximately USD 4.56 after withholding — which at recent exchange rates (AUDUSD around 0.70) translates to roughly AUD 6.50 per share per year.

The Kenvue update matters here. Many Australians who have held JNJ in their SMSF for years built their position thesis around the blended consumer/pharma/medtech profile. That thesis has changed. The company they now hold is more concentrated in higher-margin pharmaceutical and device revenue — which means higher growth potential but slightly more drug-cycle risk. This is worth reviewing with your adviser, particularly if the position was accumulated pre-2023.

Platform access for direct holdings: JNJ trades on the New York Stock Exchange (NYSE). Australian investors can access it directly through brokers offering US market trading — Stake, CommSec International, Interactive Brokers, and others all facilitate this. Standard CHESS-sponsored holdings do not apply to US-listed shares; they are held in nominee structures.

ETF access:

• IXJ (iShares Global Healthcare ETF): Listed on the ASX. Tracks the S&P Global 1200 Health Care Index. JNJ is typically a top-10 holding. Accessible through any standard Australian broker.
• VHT (Vanguard Health Care ETF): US-listed (NYSE Arca). Tracks the MSCI US Investable Market Health Care 25/50 Index, with a heavier weighting to US-only names including JNJ. Accessible through US trading accounts but not directly on the ASX.

For investors who want JNJ exposure but prefer simpler tax reporting and no nominee structure complexity, IXJ is the cleaner entry point. For those comfortable with a US brokerage account, direct JNJ ownership gives you full dividend access and the ability to utilise any future corporate actions cleanly.

Coming next week…

The company that owns Coca-Cola shares, one of the largest rail networks in America, hundreds of billions in cash and marketable securities, and the most watched CEO transition in corporate history.

Data Sources:

• Johnson & Johnson Investor Relations: Q2 2026 Results and raised 2026 outlook (15 July 2026); Dividend increase announcement (14 April 2026); Full-Year 2025 Results (January 2026); Q2 2026 Earnings Presentation.
• Kenvue separation: Completed 23 August 2023 (company announcements).
• Market data (share prices, market caps, P/E ratios, yields): Approximate as of late July 2026 (Yahoo Finance, company IR, Macrotrends and similar aggregators).
• Talc litigation: MDL-2738 case counts and status reports as of July 2026 (court and plaintiff-side trackers); prior settlement proposals and bankruptcy rulings.
• Berkshire Hathaway 13F filings history (position build from 2006 and full exit by Q3 2023).
• Peer financials and dividend histories: Company IR releases and standard data providers (late July 2026).
• Exchange rates: Approximate AUDUSD levels around 0.70 in late July 2026.

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Disclaimer: Wall St. Down Under is an independent financial newsletter for informational and educational purposes only. Nothing published here constitutes financial advice, a recommendation to buy or sell any security, or a solicitation of any investment decision. Always do your own research and consult a licensed financial adviser before making investment decisions. Australian investors should consider their own financial situation, objectives, and risk tolerance. Past performance is not indicative of future results.