J&J Surpasses MSFT in Long-Term Dividend Income

Microsoft and Johnson & Johnson are two of the most respected dividend-paying companies in the world. Recently, both raised their quarterly dividends. Microsoft's increase was an 8% rise to $0.98 a share, while Johnson & Johnson continued its streak of annual dividend increases for the 64th consecutive year.

Despite Johnson & Johnson's higher yield at around 2%, Microsoft has been growing its dividend twice as fast over the last five years. However, Microsoft is now facing challenges with its cash flow due to significant capital spending on AI and other investments.

In contrast, Johnson & Johnson's dividend growth may be slower but its starting point is much higher. The company's free cash flow covers its dividends comfortably, and its net debt is manageable at 0.81x EBITDA.

Over the next decade, Johnson & Johnson's dividend income is expected to outperform Microsoft's by a significant margin, with $343 in year 10 compared to $195 for Microsoft.