JNJ Stock: A Boring Business That Delivered 600% Return in the Last 20 Years
If the idea of buying a stock and holding it forever sounds good to you, then you should take a serious look at Johnson & Johnson (NYSE:JNJ) stock.
In a market where high-momentum tech stocks are making double-digit moves every other day, the “buy and hold” strategy doesn’t get much attention. But note this: over time, solid blue-chip companies like Johnson & Johnson can deliver extraordinary returns.
The chart below shows the total return of JNJ stock over the last two decades.
Chart courtesy of StockCharts.com
During this period, the New Brunswick, New Jersey-based healthcare giant delivered a total return of more than 600% to its shareholders. To give you some perspective, the benchmark S&P 500 Index returned just under 170% in the last 20 years.
Moreover, with stocks that are suitable for the “buy and hold” strategy, there is no need to constantly monitor your position. For instance, Johnson & Johnson stock investors didn’t really have to worry too much about company-specific news. This is in part because they don’t need to actively trade the stock to make a profit. A portion of that 600% return came in the form of dividend checks that always arrived in the mail on time.
Collect Steadily Increasing Dividends from JNJ Stock
For income investors with a long-term horizon, few things are better than a steadily increasing stream of dividends. And when it comes to delivering rising payouts, few companies have done a better job than Johnson & Johnson.
JNJ stock has increased its quarterly dividend rate every year for 55 consecutive years. That makes it a “dividend king,” a title given to companies with at least five decades of annual dividend hikes. (Source: “Dividend History,” Johnson & Johnson, last accessed August 28, 2017.)
The dividends not only provided investors with a great source of income, but also made it easier for investors to hold on to their shares during market downturns. After all, when the stock market crashed during the dot-com bubble burst, almost every stock was deep in the red. What could prevent investors from selling their shares?
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JNJ Stock: A Top Dividend Stock for 2017 and Beyond
Well, if the company that you owned were still paying increasing dividends, it could make you think twice before selling you shares during those market downturns. This is because at the end of the day, dividends reflect a company’s fundamentals. And because dividends are sticky, companies don’t want to raise their payout to unsustainable levels. So when Johnson & Johnson decided to raise its dividend rate when everything else was deep in the doldrums, it gave investors a reason to hold on to their shares.
And as you can see from the chart, those that held on to JNJ stock during market downturns–the dot-com bubble burst of 2001 and the Great Recession of 2008–were generously rewarded.
Final Thoughts on JNJ stock
At the end of the day, keep in mind that healthcare is known to be a recession-proof industry. With established market positions in consumer healthcare products, pharmaceuticals, and medical devices, Johnson & Johnson could continue to reward income investors for decades to come.