I do not own this stock 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.
When I was updating my spreadsheet, I noticed is that long term debt is increasing at a fast rate. Last increase was 36.69% and in 2016 it was 74.55%. Goodwill and intangibles increase a lot last year at the rate of 71.36%. Net Income dropped mainly because of provisions for taxes on income. Most of this provision provides for taxes on previously undistributed foreign earnings, so the drop in Net Income is not a worry.
The dividend yield on this stock has been moderate (2% to 3% range). The current dividend yield is 2.48%, with 5, 10 and historical yields at 2.85%, 3.06 and 2.25%. The dividend yields were better in the past than currently. As you can see from the chart below in US$, the growth used to be in the 10 to 11% range, but over the past 10 years the yield per year was 7.44% and for the past 5 years it has been 6.71%. So, it has gone from a moderate growth to a low one.
Generally, the Dividend Payout Ratios for EPS has been in the 50% range and for CFPS in the 40% range. However, 2017 was not a good year for earnings so the Dividend Payout Ratio for 2017 was 706% with 5 year coverage at 66%. However, it should improve in 2018. The Dividend Payout Ratio was also high in 2017 at 90% with 5 year coverage at 47%. This will improve to normal next year. There was a special tax provision in 2017 that will not re-occur.
The debt ratios on this stock are fine. Even though debt has increased a lot lately, the Long Term Debt/Market Cap Ratio is low at 0.08. The Liquidity Ratio is a little low in 2017 at 1.41, but the 5 year median is 2.20 and the ratio for the third quarter of 2018 is better at 1.72. The Debt Ratio in 2017 is good at 1.62. The Leverage and Debt/Equity Ratios are normal at 2.61 and 1.61.
The Total Return per year is shown below for years of 5 to 29 for Canadian Shareholders. Under the Capital Gain column is the portion of the Total Return attributable to capital gains. Under the Dividend column is the portion of the Total Return attributable to dividends. See charts below.
As you can see by comparing the charts below, sometimes we Canadians did better than the Americans and sometimes not. For Canadians holding this stock for the past 15 years, we did rather poorly. The difference is because of the US$ - CDN$ exchange rate.
| Years | Div. Gth | Tot Ret | Cap Gain | Div. |
|---|---|---|---|---|
| 5 | 11.73% | 23.84% | 20.19% | 3.64% |
| 10 | 10.03% | 13.05% | 10.28% | 2.78% |
| 15 | 8.32% | 6.96% | 5.03% | 1.92% |
| 20 | 10.11% | 8.97% | 6.89% | 2.09% |
| 25 | 10.01% | 11.02% | 8.71% | 2.31% |
| 30 | 12.44% | 15.78% | 12.24% | 3.54% |
The Total Return per year is show below for years of 5 to 29 for US Shareholders. US shareholders have had good growth rates over all the periods covered.
| Years | Div. Gth | Tot Ret | Cap Gain | Div. |
|---|---|---|---|---|
| 5 | 6.71% | 18.01% | 14.79% | 3.22% |
| 10 | 7.44% | 10.34% | 7.67% | 2.67% |
| 15 | 10.00% | 9.02% | 6.66% | 2.36% |
| 20 | 10.82% | 9.85% | 7.57% | 2.27% |
| 25 | 11.42% | 12.80% | 10.09% | 2.70% |
| 29 | 12.13% | 15.21% | 11.93% | 3.28% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 16.15, 17.99 and 19.80. The corresponding 10 year ratios are 15.66, 17.36 and 19.27. The corresponding historical ratios are 16.33, 18.41 and 20.60. The current P/E Ratio is 22.53 based on a stock price of $145.34 and 2018 EPS estimate of $6.45. This stock price testing suggests that the stock is relatively expensive.
I get a Graham Price of $59.12. 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 2.46 based on a stock price of $145.34. This stock price testing suggests that the stock is relatively expensive.
I get a 10 year median Price/Book Value per Share Ratio of 3.49. The current P/B Ratio is 6.03 based on Book Value of $64,626M, Book Value per Share of $24.09 and a stock price of $145.34. The current ratio is some 73% above the 10 year median ratio. This stock price testing suggests that the stock is relatively expensive.
I get an historical median dividend yield of 2.25%. The current dividend yield is 2.48% based on dividends of $3.60 and a stock price of $145.34. The current yield is some 10% higher than historical median yield. This stock price testing suggests that the stock is relatively reasonable and below the median.
The 10 year median dividend yield is 3.06%. The current dividend yield is 2.48%, a value some 19% lower. This stock price testing suggests that the stock is relatively reasonable but above the median.
The 10 year median Price/Sales (Revenue) Ratio is 3.03. The current P/S Ratio is 4.79 based on 2018 Revenue estimate of $81,366, Revenue per share of $30.32 and a stock price of $145.34. The current ratio is some 58% above the 10 year median ratio.
My favourite stock price testing is using the current dividend yield against the historical median dividend yield and this shows the stock is relatively reasonable and below the median. However, if I use the 10 year median yield it becomes reasonable but above the median. I do not think that I can ignore the other tests of which all say that the stock is relatively expensive. I also quite the P/S Ratio test and this says that the stock is relatively expensive.
The stock has had momentum since May of this year and is below its January high. The other thing to mention is the price seems very close to were analysts expect it to be in a 12 month period. It would seem the price is higher on many levels than over the past 10 years. But historically may be different as the current P/E of 22.53 is not that much higher than the median high of 20.60.
When I look at analysts’ recommendations, I find Strong Buy (5), Buy (4), Hold (8) and Sell (1). The consensus would be a Buy. The 12 month stock price consensus is $146.76. This implies a total return of 3.45%, with 2.48% from dividends and 0.98% from capital gains.
Thomas White on the Globe and Mail talks about the third quarter being better than expected. Daniel Ren on South China Morning Post talks about JNJ’s investment in China. Emma Wright on Western New Jersey News talks about a subsidiary of JNJ being suited over opioids. Chuck Saletta on Motley Fool says this stock likely to grow at 7.9% per year over the next 5 years. See what analysts are saying about this stock on Stock Chase. They mostly see it as a defensive stock.
Johnson & Johnson is engaged in the research and development, manufacture, and sale of a range of products in the healthcare field. The Company operates in three segments: Consumer, Pharmaceutical, and Medical Devices and Diagnostics. Its web site is here Johnson and Johnson.
The last stock I wrote about was about was be Cenovus Energy Inc. (TSX-CVE, NYSE-CVE) ... learn more. The next stock I will write about will be HLS Therapeutics Inc. (TSX-HLS, OTC-HLTRF) ... learn more on Friday, November 16, 2018 around 5 pm. Tomorrow on my other blog I will write about Money Show 2018 – Derek Foster.... learn more on Thursday, November 15, 2018 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.
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