Johnson & Johnson (JNJ) is a US-based multinational pharmaceutical company with hundreds of subsidiaries. Its brand-names are ubiquitous in pharmacies and medicine cabinets around the world, and include Johnson’s brand baby products, Band-aid brand bandages, and Tylenol. JNJ is in the Fortune 500, employs approximately 114, 000 people, and exceeded $60 billion in revenue in 2011. Its common stock is used in calculating the DOW Jones Industrial Average.
The company is also known for its extremely high reputation. It has been ranked number one by Harris Interactive’s National Corporate Reputation Survey (HPOL) seven times (most recently in 2005), and was ranked as the world’s most respected company by Barron’s Magazine in 2008. For the last several years JNJ has run ad campaigns on its environmental initiatives. Since its 1886 founding, the company has carefully built up and protected its public image, important for a consumer-oriented company.
In their third quarter conference call on October 18, 2011, JNJ William Weldon and staff reported a decrease in domestic sales by 3.7%, but an increase in international sales by 16.4%. Earnings per share were $1.15 for Q3 2011. Total 2011 earnings per share are predicted at $4.95-$5.00.
Several recent product launches are cited as contributing to operational sales growth, which increased by 2.6% domestically and 8.3% internationally. Weldon emphasized JNJ’s innovations in developing and marketing new products as the reason for the company’s consistent sales growth.
JNJ has this year’s first quarter dividend, as of January 3, 2012, at $0.57 per share. This is in keeping with its current indicated annual dividend of $2.28 per share. Impressively, the dividend pay-outs of this stock (by percentage) have increased every year for the past 25 years. Its payout ratio is 54%.
JNJ’s stock price has been remarkably steady through the financial crisis and recession, with its biggest drop (in late 2008) still falling short of 30%. The stock price has hovered around $65 a share for the last six months or so, indeed for the last six years or so (though with larger fluctuations on that timescale). Lately its behaviour is somewhat bullish, so prospective investors might be advised to pick up their stake now, rather than a couple months down the road. But in the long-term these fluctuations are insignificant. A difference of 10% in the principal investment will quickly be forgotten as the dividend payments come rolling in.
JNJ is a powerhouse of a dividend stock. The bluest of blue chips, you can sit back and increase your holdings year after year as you re-invest those quarterly payments, without worrying about major changes in the stock price. As steady as she comes, JNJ stock has had tremendous returns, around 10, 000% over the last 20 years, while still maintaining a good payout ratio. A great long-term choice for anyone’s portfolio. Buy it and hold onto it.
Disclosure: I do not currently hold any position in the stocks mentioned, nor do I intend to initiate any such position within 72 hours of publication.
Harris Interactive’s National Corporate Reputation Survey (HPOL) seven times (most recently in 2005), and was ranked as the world’s most respected company by Barron’s Magazine