Johnson and Johnson

I do not own this stock of Johnson and Johnson (NYSE-JNJ). 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.

For 5 year periods ending December 2002 to December 2013 a Canadian investor would have made money 9 year out 12 years. However, the median 5 year total return is just 1.16% per year, including dividends. The total return would be above 4% in only 4 of these 5 year periods. The best 5 year total return years were 2002 with a 14.26% per year total return and 2013 with an 8.66% per year total return. Over the past 10 years the total return for Canadian investors would be 6.54% per year.

The stock has done better in the US$ as the 5 and 10 years total return is 12.04% and 8.81%. The portion of this total return from dividends is at 3.17% and 2.70%. The portion of this total return from capital gains is at 8.88% and 6.11% per year.

The company certainly has a long history of dividend growth and a decent dividend. In US$ the 5 and 10 year dividend growth is at 7.6% and 10.8% per year over the past 5 and 10 years. The current dividend yield is 2.61% and it has a 5 year median yield of 3.46%.

For Canadian investors, the dividend increases over the past 5 and 10 years is at 4.6% and 8.7% per year. The current dividend yield is 2.61% with a 5 year median dividend yield at 3.46%. The problem for Canadian investors is that the dividends paid will fluctuate with the fluctuations in the currency exchange rate.

Over the past 5 and 10 years the CDN$ is down by 2.8% and 1.9% per year. The relative decline in the CDN$ compared to the US$ accounts for the differences in total return between Canadian and US investors.

The outstanding shares have increased by 2.4% and 0.5% per year over the past 5 and 10 years. Growth in Revenue, Earnings and Cash Flow has all done better over the past 10 years than over the past 5 years. Growth over the past 5 years is from slightly negative to slightly positive. Growth over the past 10 years is from mediocre to good. All my growth figures are in US$.

Revenue has grown at 2.3% and 5.5% per year over the past 5 and 10 years. Revenue per share has declined by 0.1% and increase by 5% per year over the past 5 and 10 years. The growth using 5 year running averages is better with 5 and 10 year growth at 3.6% and 7% per year.

EPS is up by 1% and 7.2% per year over the past 5 and 10 years. If you look at 5 year running averages over the past 5 and 10 years, EPS does better with growth of 3.2% and 8.5% per year. This is a retail stock, so EPS do tend to fluctuate and this is why 5 year running averages can sometimes give a better view of what is happening. They also give an adjusted EPS and this has grown at 3.9% and 7.4% per year over the past 5 and 10 years.

Cash flow is down by 0.1% and up by 6.5% per year over the past 5 and 10 years. Here again, if you look at 5 year running averages, growth is better with growth at 4.1% and 8.1% per year over the past 5 and 10 years. The comment on EPS growth concerning 5 year running averages applies to cash flow as well.

I have statistics on this stock going back to 1998 and the Return on Equity has been above 10% in each year. The ROE for 2013 was at 18.7% and the 5 year median ROE is 18.7%. The ROE for comprehensive income for 2013 is 22.7% and the 5 year median ROE for comprehensive income is 22.7%. When the ROE on comprehensive income is the same or higher than the ROE on net income, it suggests that the earnings are of good quality.

The debt ratios are all quite good. The Liquidity Ratio for 2013 is at 2.20. This ratio has a 5 year median of 2.51. The Debt Ratio for 2013 is at 2.26. This ratio has a 5 year median of 2.15. Leverage and Debt/Equity Ratios for 2013 are at 1.79 and 0.79. The 5 year median ratios are 1.82 and 0.82. You can see from the 5 year median ratios that these ratios tend to be consistently good.

Sound bit for Twitter and StockTwits is: US Health Care Dividend Growth Stock. See my spreadsheet at jnj.htm.

This is the first of two parts. The second part will be posted on Friday, November 28, 2014 and will be available here. The first part talks about the stock and the second part talks about the stock price.

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.

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