JNJ Stock: Is Johnson & Johnson Stock Worth Owning Forever?
January 3, 2017
Johnson & Johnson Stock Still a Dividend King
Income investors are no strangers to Johnson & Johnson (NYSE:JNJ) stock. For decades, it has been providing increasing dividends to its shareholders. But now, when there are so many new companies with surging stock prices, does JNJ stock still deserve a spot in an income investor’s portfolio?
The answer is “yes.” Not only does Johnson & Johnson stock deserve a spot today, but it could actually be a stock worth owning forever. Let me explain.
Johnson & Johnson has been around for well over 100 years. Today, it is a giant multinational company making medical devices, pharmaceuticals, and consumer goods. Johnson & Johnson has 250 operating companies in 60 countries. Its products are sold in virtually every country in the world.
What this means is that the company is deeply entrenched in the segments it operates in. For instance, in the pharmaceutical segment, Johnson & Johnson has over 100 drugs marketed, 46 of which generate over $50.0 million in annual sales each. (Source: “Johnson & Johnson 2015 Investor Fact Sheet,” Johnson & Johnson, last accessed November 18, 2016.)
Johnson & Johnson’s consumer goods segment also needs no introduction. With well-known brands such as “Johnson’s Baby” and “Band-Aid,” the company’s products have reached almost every market in the world.
Because the company’s business has already been established, JNJ stock can afford to return some of its profits to shareholders.
In fact, the company started paying dividends a long time ago. What’s more impressive is Johnson & Johnson’s ability to raise its payout. The company has increased its annual dividend every single year for the past 54 years. That makes JNJ stock a “dividend king,” a title reserved for companies with at least five decades of consecutive dividend hikes. (Source: “Dividend History,” Johnson & Johnson, last accessed December 30, 2016.)
Right now, the company pays $0.80 per share on a quarterly basis, giving JNJ stock an annual dividend yield of 2.77%.
Best of all, despite being a century-old company, Johnson & Johnson is still growing its business. In the third quarter of 2016, Johnson & Johnson generated $17.8 billion in sales, up 4.2% year-over-year–and that’s including a 0.1% negative impact from currency translation. Domestic sales increased 6.7%, while international sales increased 1.5%. (Source: “Johnson & Johnson Reports 2016 Third-Quarter Results,” Johnson & Johnson, October 18, 2016.)
The bottom line improved as well. Excluding one-time items, adjusted earnings came in at $1.68 per share, representing a 12.8% increase from the year-ago period.
Of course, Johnson & Johnson’s growth does not look that impressive compared to the explosive stocks in the tech sector. However, investors of JNJ stock were still handsomely rewarded. In the last five years alone, Johnson & Johnson stock surged 76.2%, and that’s on top of its steadily increasing dividends.
Don’t forget that the dividends from JNJ stock could be recession-proof, and that goes back to the nature of the company’s business. Most products from Johnson & Johnson are not very exciting, but that’s because they are what people need rather than want. When the economy enters a recession, consumers might not be buying as many new cars as before, but if they need “Band-Aids” and “Tylenol,” they would still buy them.
Johnson & Johnson stock’s dividend history proves the point. The world economy had quite a few ups and downs over the past five decades, but JNJ stock never stopped raising its payout to income investors.
The Bottom Line on JNJ Stock
As a 130-year-old company commanding over $300.0 billion of market cap, JNJ stock probably won’t shoot through the roof anytime soon. What the company could do, however, is keep rewarding dividend investors.
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