Friday, September 21, 2012

Johnson and Johnson

I do not own this stock (TSX-JNJ). This is one of the very few US stocks that I follow. I held it for a short time, buying it in June 2005 and selling in June 2006. I did not think that I would ever make much, if any money on this stock. I had a loss of 16.82% on this stock.

The last 5 year period where a Canadian made some good money on this stock is the 5 year period to 2002 where the total return was 14.26% per year. Between then and the end of 2011, the only 5 year period where a Canadian has made some money on this stock is 2008 when a total return of 4.69% per year was made. Every other 5 year period a Canadian would have had a loss or made very little. For example the total return for 5 year periods ending in 2004, 2009 and 2011 the 3.77% per year, 0.06% per year and 0.06% per year.

The total return for the last 5 and 10 years to the end of 2011 was a gain of 0.06% per year and loss of 1.34% per year, respectively. The dividend portion of the total return over the past 5 and 10 years was 2.81% and 2.13% per year. The capital loss was at 2.74% and 3.47% per year.

Since all values on this stock is in US currency, I think the only way to start to value this stock as a Canadian is what you would have earned being invested in this stock. Your actual returns would probably have varied from what is on my spreadsheet depending on what exchange rates were used and if you had this stock in a Canadian currency account or a US currency account.

Of course, the next thing you want to know about a stock is how well it is doing in its home currency. Let's start with total return. In US$, the total return over the past 5 and 10 years would be 2.79% and 3.30% per year. Dividends would account for 2.93% and 2.38% per year over this period. You would have had a capital loss over the past 5 years of 0.15% and a capital gain over the past 10 years of 0.92%.

Now on to dividends, a subject I like to talk about. In US currency terms, dividends have increased over the past 5 and 10 years at 9.11% and 12.39% per year, respectively. (However dividend increases have not been so good for Canadian stock holders with 5 and 10 year increases at 6.27% and 7.5%. This would also depend on what currency exchange rates that are used if you held the stock.)

They have marginally increased their outstanding shares over the past 5 and 10 years at the rate of 1.14% and 1.13% per year. They have been issuing stock options each year (which increases outstanding shares) and buying back shares (which decreases outstanding shares).

Revenue growth over the past 5 and 10 years is 4.05% and 7.02% per year, respectively. Revenue per Share growth over the past 5 and 10 years is at 5.25% and 8.24% per year. The difference, of course, is accounted for by the change in outstanding shares.

Earnings per Share have gone done over the past 5 years by 1.32% per year. EPS has increased over the past 10 years at 6.61%. Analysts expect 2012 to be a very good year with EPS at a mean of $5.06. However, the last 12 months EPS is $3.14 and this is lower than for 2011 with EPS at $3.49, so I do not expect this to be the real EPS. Just to make things confusing some sites, as is JNJ, are using an Adjusted Earnings figure and the Adjusted EPS seems to be what some analysts are quoting. (Also, I cannot seem to replicate how they get this Adjusted EPS.)

The Cash Flow per Share growth is also low, with 5 and 10 year growth at 0.19% and 6.75% per year. The only good growth is for Book Value per Share, which over the past 5 and 10 years grew at 8.98% and 10.12% per year. Generally when the comprehensive income is substantially lower than the net income, you wonder how good the quality of the net income is.

The Return on Equity seems to be where this company has excelled. The ROE for the end of 2011 was in the very good range of 16% to 20% at 16.6%. The 5 year median ROE is better at 24.2% for the year ending in 2011. This is one of the few US companies I have seen to give out the Comprehensive Income. The ROE on comprehensive income for the year ending in 2011 was 13.3%. Not as good as the ROE on net income.

The current Liquidity Ratio is good at 1.75. The current Debt Ratio is also quite good at 2.09. Also both the current Leverage and Debt/Equity Ratios are good at 1.92 and 0.92.

This stock has currently a decent dividend, and decent dividend growth. As far as total returns go, it has not done so well and even worse for Canadian investors.

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 JNJ. See my spreadsheet at jnj.htm.

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. See my website for stocks followed and investment notes. Follow me on twitter.

No comments:

Post a Comment