In the elite world of Dividend Aristocrats – those S&P 500 members that have consistently raised their dividend payouts for at least 25 years – one name is shaking things up this quarter. Kenvue Inc. (KVUE), the healthcare giant that spun off from Johnson & Johnson's (JNJ) consumer division last year, made a splash with its latest earnings report.
Last month, KVUE also boosted its dividend, and its yield now outshines those of both the S&P 500 Dividend Aristocrats ETF (NOBL) and S&P 500 SPDR (SPY), turning heads among passive income investors. And following a Q2 earnings report that crushed expectations on both the top and bottom lines, KVUE stock shot up double digits on Aug. 6 for its biggest daily gain on record.
With a dividend that stands out in the crowd and a strong beat on earnings, Kenvue is grabbing the attention of income-focused investors looking for solid returns. Let’s take a closer look.
About Kenvue Stock
Kenvue Inc. (KVUE), which completed its separation from JNJ just about a year ago, has a familiar niche in global wellness. With iconic consumer brands like Tylenol, Neutrogena, and Listerine under its umbrella, Kenvue leads in self-care, skin health, and essential health. Headquartered in Skillman, New Jersey, this powerhouse blends trusted names with innovation, driving forward in the ever-evolving consumer health landscape.
Valued at $41.4 billion, shares of the consumer health company have declined 5.7% over the past 52 weeks. But the tide has turned in recent months. Over the past six months, KVUE stock has climbed 13.6%, including an impressive 18.2% surge in just the past month. Drilling down even further, KVUE notched a huge 14.7% rally in one day following its standout Q2 earnings report on Aug. 6.
Priced at 19.91 times forward earnings and 2.67 times sales, Kenvue trades at a discount to its closest peers, such as Procter & Gamble Company (PG) and Colgate-Palmolive (CL). For a consumer health giant finding its stride, these are attractive numbers, and indicates a potential buying opportunity in KVUE.
Kenvue’s Double Beat on Earnings
The company reported stronger-than-forecast fiscal Q2 earnings results on Aug. 6, which sparked the stock’s record-setting session. KVUE’s revenue of $4 billion was down slightly year over year, but came in ahead of estimates for $3.93 billion. Adjusted EPS rose 3.2% to $0.32, again beating the analyst consensus for $0.28.
In Q2, the company’s adjusted gross profit margin rose by 410 basis points to 61.6%. This impressive leap was fueled by supply chain efficiency gains, including lower commodity costs and smart value realization.
Kenvue’s productivity and cost-reduction efforts have been pivotal to its first year as an independent company, allowing management to increase investment in brand growth without compromising profitability. Despite a challenging environment, Kenvue is on track to achieve long-term value creation for shareholders.
Looking ahead, Kenvue backed its guidance for adjusted EPS of $1.10 to $1.20 for the full fiscal year 2024, with sales growth projected between 1% to 3%. At the midpoint, that forecast exceeded the consensus on both counts, with analysts looking for EPS of $1.14 on 1.3% sales growth.
Management also projects a gross margin close to 60%, expanding about 150 basis points versus last year.
Kenvue's First Solo Dividend Boost
Kenvue, despite being freshly minted as an independent entity, was grandfathered into the list of Dividend Aristocrats, thanks to its parent company Johnson & Johnson’s long legacy of raising dividends.
On July 25, Kenvue announced its first independent dividend increase of 2.5% to $0.205 per share on its common stock, payable to the shareholders next week on Aug. 28. KVUE now offers an annualized dividend of $0.82 per share, translating to a yield of 3.78% – outshining both NOBL’s 2.08% yield, and SPY’s 1.23%.
Furthermore, the stock maintains a payout ratio of 65.53%, which suggests that the company is sharing a generous slice of its earnings with shareholders, yet keeping enough to fuel future growth.
What Do Analysts Expect for Kenvue Stock?
Analysts are upbeat about KVUE stock’s prospects, with a consensus “Moderate Buy” rating overall. Among the 14 analysts covering the stock, five are highly bullish with a “Strong Buy,” one advises a “Moderate Buy,” seven suggest a “Hold,” and one recommends a “Strong Sell.”
The mean price target for KVUE is $22.67, indicating an upside potential of 5% from current levels. The Street-high target price of $28 implies the stock could rally as much as 29.7%.
On the date of publication, Sristi Suman Jayaswal did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
