It's clear from the chart above that the share price has followed the trailing 12-month revenue per share growth. As long as that revenue trajectory continues to go higher, and especially if the EPS moves in the same direction, JNJ should do just fine in the long run. This is founded on the historical fact that this diversified purveyor of all sorts of healthcare products has raised its dividend for 50 consecutive years. Over the past 10 years the average annual increase of its dividend payout has been close to 12% per year.
Yet, we should also be prudent and note that as the dividend payout has increased so has the payout ratio. As of March 31, that payout ratio is now at 62%. For comparison one of its smaller competitors, Baxter International ( BAX), with its 2.6% current yield-to-price, has a payout ratio of 38%. Before the U.S. markets opened on Thursday BAX announced that it achieved its first-quarter earnings and revenue expectations. The company also triumphantly confirmed its full-year guidance. Let's focus for a minute on what BAX does to drive sales growth and EPS numbers.