Johnson and Johnson

First I would like to say that I have today sold my shares in Barclay's PLC (NYSE: BCS) and Bombardier Inc. Class B (TSX:-BBD.B, OTC-BDRBF). None of the European banks are doing well and Barclay's has not since 2008 recession. Bombardier has not recovered from the 2000 recession. With the money from Bombardier I bought some more Canadian Utility (TSX-CU, OTC-CDUAF). Looking at a dividend yield test, the Canadian Utility stock is reasonably priced.

Sound bite for Twitter and StockTwits is: Dividend Growth Health Care. On all tests but the dividend yield test this stock seems to be relatively expensive. The dividend yield test suggests that the price is reasonable and below the median. If you use the 5 and 10 year median dividend yields, the price also seems relatively expensive. See my spreadsheet on 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. 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.

It took me 5 tries to get the annual statement for 2016. I do not know why they have to make this difficult. They put out lots of information and lots of filings with SEC, but I wanted annual statements. They could make that clear where they are and once you get the statements I had to do a search for the Balance Sheet to find the annual statements.

This stock is considered a dividend king having increased it dividends for about the last 55 years. According to my spreadsheet, dividends have grown by 6.96% and 8.03% per year over the past 5 and 10 years. Longer term growth is better with growth at 10.33% and 11.12% per year over the past 15 and 10 years. This means that the total growth in dividends over the past 5, 10, 15 and 10 years is 40%, 116%, 296% and 641%. So growth is low to good.

The dividend yield is moderate with current dividend yield at 2.43% and the historical median at 2.22%. The 5 and 10 year median yield is a bit higher at 2.99% and 3.06%. With growth and yield after 5, 10 or 15 years, yield would be 4.93%, 5.17% and 6.21%. Also because of dividends after 5, 10 or 15 years, 21.9%, 39.3% or 59.2% of the stock price would have been covered by dividends.

The debt ratios are generally good. The Liquidity Ratio for 2016 is 2.47 with 5 year median of 2.20. The Debt Ratio for 2016 is 1.99 with 5 year median of 2.14. The Leverage and Debt/Equity Ratios for 2016 were 2.01 and 1.01 with 5 year median of 1.88 and 0.88, respectively.

Their long term debt went up some 61% and some 10B. From their statements it seems they might have spent it on Property, Plant and Equipment of $3B and buying back Shares of $8.9B. However, long Term Debt/ Market Cap Ratio is only 0.08, a very low value. I do not really like to see companies borrowing money to buy back shares.

The Return on Equity for 2016 was 23.5% with 5 year median of 21.7%. I have data back to 1988 and ROE has been above 10% each year. The ROE on Comprehensive Income is a bit lower with the ROE for 2016 at 21% and the 5 year median at 18.2%. Since comprehensive income has been published (2006), it has been above 10%.

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 15.66, 17.36 and 18.99. The historical ones are 16.15, 18.18 and 20.06. The current P/E Ratio is 23.15 based on a stock price of $138 and 2017 EPS estimate of $5.96. This stock price testing suggests that the stock price is relatively expensive.

I get a Graham Price of $60.54. 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 2.28 based on a stock price of $138.00. This stock price testing suggests that the stock price is relatively expensive.

The 10 year median Price/Book Value per Share Ratio is 3.71. The current P/B Ratio is 5.05 based on Book Value of $73,979M, BVPS of $27.33 and a stock price of $138.00. The current P/B Ratio is some 36% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive.

The historical median dividend yield is 2.22%. The current dividend yield is 2.43% based on dividends of $3.36 and a stock price of $380.00. The current dividend yield is some 9.7% above the historical yield. This stock price testing suggests that the stock price is relatively reasonable and above the median.

However, if you look at the 5 and 10 year median dividend yield, they are both higher than the current yield. The 5 year median dividend yield is 2.99% a value 19% higher than the current yield. The 10 year median dividend yield is even higher at 3.06% and 20% higher than current yield. In this case the stock price looks relatively expensive.

The 10 year median Price/Sales (Revenue) Ratio is 2.90. The current P/S Ratio is 4.51, a value some 69% higher. The current P/S Ratio is based on 2017 Revenue estimate of $76,324, Revenue per Share of $28.20 and a stock price of $380.00. This stock price testing suggests that the stock price is relatively expensive.

When I look at analyst's recommendations I find that they cover all of them from Strong Buy (6), Buy (5), Hold (8), Underperform (1) and Sell (2). The 12 month consensus stock price is $144.90. This implies a total return of 7.43% with 5.00% from capital gains and 2.43% from dividends.

The problem with being in health care is that you can be sued. JNJ has outstanding suits on the use of Talc Powder according to Eric Sagonowsky at Fierce Pharama. With anything I have read there is no or little risk of cancer from Talc, but a jury may see that differently and JNJ is being suited. JNJ has set up a Digital Beauty QuickFire Challenge according to Beth Snyder Bulik at Fierce Pharma. Tatum Peregrin on the Ledger Gazette talk about some recent activities of institutions on buying and selling this stock. According to my records last year 2291 Institutions owned 65.19% of the shares of this company and today 3065 Institutions own 67.84% of the shares. See what analysts are saying about this company on Stock Chase. Mostly they like the company.

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.

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 22, 2017 around 5 pm. Tomorrow on my other blog I will write about Hillsdale Investment Management... learn more on Tuesday, November 21, 2017 around 5 pm.

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. I am on Instagram. Or you can just Google #walktoronto spbrunner8166 to see my pictures.