Johnson and Johnson

Sound bite for Twitter and StockTwits is: Price reasonable to expensive. On an historical basis the stock price seems cheap to reasonable. However, comparing to values over the past 10 years the stock is reasonable, but above the median. See my spreadsheet on Johnson and Johnson.

I do not own this stock of Johnson and Johnson (NYSE-JNJ), but I used to. As Canadians, we are told we should be buying US stocks for our portfolio. It is often recommended that we have at least 25% of our portfolio in US stocks. I have never followed this, although I have tried dipping into the US market, but I have never made any money there. I bought some of this stock in June 2005 and realized a year later, in June of 2006 that it was going nowhere for me and sold. I lost almost 17% of my investment. When I bought in 2005, all the analysts were saying that it was a good buy at that time.

Since this is a US dividend growth stock, dividends payments will vary with the exchange rate and so as a Canadian you will never know exactly what dividends you will receive. Over the past 5 and 10 years dividends have grown at 6.9% and 8.8% per year in US$. Over the past 5 and 10 years the dividends have grown at 14.2% and 10.7% in CDN$. At different time periods this will be different.

The dividends are moderate as are the dividend increases. The current dividend yield is 2.78%. The historical median dividend yield is 2.18%. The 5 year median dividend yield is 3.12%. The 10 year median dividend yield is 3.06%.

For the 5 year periods ending in December 2014 and 2015, the total return has been good for Canadian investors in the stock with total return at 15.4% and 21.5% per year. For Canadians in the 5 year periods ending in December 2001 and 2002 Total Return was also good at 24.83% and 14.26%, respectively. However, the 5 year periods ending in December 2003 to 2011 the total return per year were negative or very low. This is a 9 year period.

If you had held this stock for 5, 10 or 15 year periods and paid a median price, you would be earning a dividend yield 5.02%, 5% or 6.2% per year on your original investment. If dividend growth continues at 6.9% per year over the next 5, 10 or 15 year periods you could be earning a dividend yield of 3.89%, 5.43% or 7.58% based on today's stock price of $ $114.91.

This stock has very good debt ratios. The Liquidity Ratio for 2015 is 2.17 with a 5 year median of 2.20. The Debt Ratio is 2.14 with a 5 year median of 2.14. Leverage and Debt/Equity Ratios for 2015 are 1.88 and 0.88 with 5 year median values of the same.

Growth over the past 5 and 10 years has been low to moderate. The Revenue per Share growth over the past 5 and 10 years is at 2.5% and 4.6% per year. The EPS growth over the past 5 and 10 years is at 2.8% and 4.7% per year. The CFPS growth over the past 5 and 10 years is at 0.7% and 4.7% per year. This is lower growth than the stock price growth with capital gains at 10.7% and 5.5% per year over the past 5 and 10 years.

The 5 year low, median and high median Price/Earnings per Share Ratios are 16.12, 17.45 and 19.41. The corresponding 10 year ratios are 15.33, 17.22 and 18.82. The historical ratios are 16.32, 18.09 and 19.93. The current P/E Ratio is 19.22 based on a current stock price of $114.91 and 2016 EPS estimate of $5.98. This stock price testing suggests that the stock price is reasonable but above the median. It is getting close to expensive.

I get a Graham Price of $59.61. The 10 year low, median and high median Price/Graham Price Ratios are 1.41, 1.58 and 1.80. The current P/GP Ratio is 1.93 based on a stock price of $114.91. This stock price testing suggests that the stock price is relatively expensive.

I get a 10 year median Price/Book Value per Share Ratio of 3.71. The current P/B Ratio is 4.35 a values some 17% higher. The current P/B Ratio is based on a stock price of $114.91 and current BVPS of $26.41. This stock price testing suggests that the stock price is reasonable but above the median. It is getting close to expensive.

The current dividend yield is 2.78% based on dividends of $3.20 and a stock price of $114.91. The historical median Dividend yield is 2.18% a value some 27.7% lower. This suggests that the stock price is cheap on a historical basis. The 10 year median dividend yield is higher at 3.06%, a value some 9% higher than today dividend yield. On a 10 year basis, today stock is relatively reasonable, but above the median.

When I look at analysts' recommendations I find Strong Buy, Buy and Hold recommendations. There are more Holds than Buys, but the consensus is a Buy. The 12 month stock price consensus is $126.53. This implies a total return of $12.90% with 10.11% from capital gains and 2.78% from dividends.

This associated press release in the Toronto Star talks about some women winning suit against Johnson and Johnson over the use of talcum power. There are different opinions about the use of talcum powder and unfortunately being in health care industry can include being suited. The blogger Income Investor really likes this stock. Todd Campbell of TMFEB Capital puts in a good word for this stock on Motley Fool. Alessandro Pasetti on Seeking Alpha puts in a cautious word on this company because a federal judge in Boston invalidated a key patent on Johnson & Johnson's blockbuster arthritis drug Remicade.

I will have only one entry for this stock this year. However, I did a more complete report on this company in 2015 and you can see those reports here and here.

The last stock I wrote about was about was Cenovus Energy Inc. (TSX-CVE, NYSE-CVE)... learn more . The next stock I will write about will be IBI Group Inc. (TSX-IBG, OTC-IBIBF)... learn more on Wednesday, November 23, 2016 around 5 pm. Tomorrow on my other blog I will write about Failed Stocks... learn more on Tuesday, November 22, 2016 around 5 pm.

Johnson & Johnson is engaged in the manufacture and sale of a broad range of products in the health care field in many countries of the world. The company's worldwide business is divided into three segments: Consumer; Pharmaceutical; and Professional. Its web site is here Johnson and Johnson.

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. I do research for my own edification and I am willing to share. I write what I think and I may or may not be correct.

See my website for stocks followed and investment notes. I have three blogs. The first talks only about specific stocks and is called Investment Talk. The second one contains information on mostly investing and is called Investing Economics Mostly. My last blog is for my book reviews and it is called Non-Fiction Mostly. Follow me on Twitter or StockTwits.