Smith+Nephew (LSE:SN) has cut its full-year guidance as US orthopaedics weakened, and it has also confirmed that Merger talks with Johnson & Johnson's orthopaedics unit failed. The news puts a Dividend that has barely grown in the past year, but that has been paid for 42 years, firmly back in focus.

A difficult update on 4 November

The third-quarter trading update showed that Revenue growth accelerated to 3.4%. That improvement was overshadowed by the outlook. Smith+Nephew now expects underlying growth for the year of around 3% and has reportedly halved its forecast for trading profit growth, with sales of hips and knees in the US remaining weak.

The company also confirmed that talks over a possible deal with Johnson & Johnson's orthopaedics Business had failed. Together, these developments remove one potential strategic route for its struggling orthopaedics arm while lowering expectations for this year, leaving the company to tackle the US orthopaedics problem through its own efforts.

Dividend growth has all but stalled

Data from a snapshot on 7 October 2026, which predates the update, shows an annual dividend of 29.0p a share, with the latest payment at 11.8p. The sterling figures carry a currency element, since Smith+Nephew (LSE:SN) reports in US dollars. The trailing 12-month Yield is 2.9%, and the indicated yield is 3.0%, a respectable if unspectacular level for a medical technology group.

Year-on-year dividend growth, however, is just 0.1%. In practice, that means the dividend has barely changed. The streak of consecutive increases stands at just one year, so the company cannot point to a long run of rises to reassure investors, and the size of the most recent increase does not suggest that a sustained growth phase has been established.

The most striking data point is 42 years of continuous payments, which is a very long record by the standards of any company in the index. It suggests that maintaining a distribution has been a consistent priority across changes of strategy, management and market conditions. The sharp contrast with a one-year growth streak shows what this record does and does not represent: reliability of payment rather than reliable progress.

Cover in light of the guidance cut

The trailing Payout Ratio of 53.5% indicates that slightly more than half of Earnings went to dividends, implying cover of a little under two times. On the available numbers, that looks moderate and manageable, and nothing in the data suggests that the payment is at immediate risk. Cover at this level would leave some room to absorb a softer year for profits.

The relevant issue is the direction of earnings. A payout ratio is backward-looking and the guidance cut relates to the period ahead. Should profit growth come in at the lower level now indicated, there may be less scope for the dividend to rise, and the ratio would be sensitive to any further earnings disappointment. The figures do not point to a cut, but they do suggest limited momentum for a higher payment.

What to watch

Investors will now focus on whether US hips and knees can stabilise and how management intends to address orthopaedics following the end of the talks with Johnson & Johnson. Full-year results will reveal whether the lower guidance holds and will set the final dividend, which is the next chance to extend a one-year growth streak. Any further announcements on portfolio strategy or Capital returns would be of interest, as would signs of whether the 3.4% growth rate reported in the third quarter is a base for the rest of the year. Whether the company can translate that into faster profit growth is the question that will shape the dividend's next stage.