Should You Invest in This Dividend King on the Dip?

During earnings season, Johnson & Johnson's (JNJ) stock has dipped after it posted lower-than-expected third-quarter financial results. However, is this a buying opportunity or should investors sell? Let's examine the company's performance. Johnson & Johnson's latest quarter beat earnings expectations with revenue reaching $25.4 billion, a 5.9% increase compared to the previous year.

Adjusted earnings per share (EPS) were $2.59, down 7.5% year-over-year, mostly due to acquisitions. The innovative medicine segment performed exceptionally well, with sales of $16.8 billion, a 7.7% increase from the prior year. Key products like Darzalex, a cancer medicine, saw a 15.4% sales increase, while Tremfya, treating autoimmune conditions, generated $2.4 billion in sales, up 68.3% year-over-year.

Despite facing challenges from competition and headwinds, several medicines in this segment are making up for the losses. Johnson & Johnson's guidance for full fiscal year 2026 was slightly increased, expecting operational sales of $100.7 billion, up from the previous $100.6 billion guidance. However, the medtech business underperformed, with revenue at $8.6 billion, 2.5% higher than the prior-year quarter.

The company acknowledged that its medtech performance was below its standards, particularly in the U.S. market where its cardiovascular unit faced safety and efficacy concerns regarding its Impella heart pumps. Looking ahead, the company is running a clinical trial for its Impella device, which, if successful, could help resolve recent challenges.

Despite this, my view is that investors should hold their ground with the stock for the long term. Here are three reasons why. Firstly, Johnson & Johnson's pharmaceutical segment is thriving and could continue to grow in the medium term. The company recently received approval for ICOTYDE, an oral IL-23 receptor antagonist for plaque psoriasis, and Imaavy, a medicine for Generalized Myasthenia Gravis and Warm Autoimmune Hemolytic Anemia, both promising growth drivers.

Secondly, Johnson & Johnson's medtech segment is expected to improve, with the launch of the Ottava, a robotic-assisted surgery device, a market with significant potential. Lastly, Johnson & Johnson is a reliable dividend stock, boasting 64 consecutive years of annual payout increases, making it a Dividend King. This makes Johnson & Johnson a compelling investment opportunity.