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.
When I was updating my spreadsheet, I noticed that EPS estimates have gone down. Last year the EPS for 2019 and 2020 were $8.37 and $8.37. Now the estimates are for these years are $6.47 and $7.41.
Dividend yield are moderate (2 to 4% range). The current dividend is 2.90% with 5, 10 and historical dividend median yields at 2.82%, 3.06% and 2.28%. The current growth in dividends is in the low range (less than 8%) current, but it has been higher in the past. See the charts below. Because this is a US stock, look at the US$ chart.
The Dividend Payout Ratios maybe a bit high for this sort of company. The DPR for 2018 for EPS is 63% with 5 year coverage at 68%. The historical median DPR for EPS is 39%. The DPR for CFPS for 2018 is 42% with 5 year coverage at 47%.
Debt Ratios are fine. The Long Term Debt/Market Cap Ratio is very low at just 0.08. The Liquidity Ratio is fine at 1.50 with 5 year median at 2.17. The Debt Ratio is good at 1.64 with 5 year median at 1.99. The Leverage and Debt/Equity Ratios are fine at 2.56 and 1.56 with 5 year median at 2.01 and 1.01.
The Total Return per year is shown below for years of 5 to 30 to the end of 2018 in CDN$. Under the Capital Gain column is the portion of the Total Return attributable to capital gains. Under the Dividend column is the portion of the Total Return attributable to dividends. See chart below.
| From | Years | Div. Gth | Tot Ret | Cap Gain | Div. |
|---|---|---|---|---|---|
| 2013 | 5 | 11.88% | 15.88% | 12.56% | 3.31% |
| 2008 | 10 | 8.19% | 11.98% | 9.16% | 2.81% |
| 2003 | 15 | 9.75% | 9.21% | 6.82% | 2.39% |
| 1998 | 20 | 9.77% | 7.07% | 5.14% | 1.93% |
| 1993 | 25 | 11.25% | 13.53% | 10.37% | 3.15% |
| 1988 | 30 | 12.56% | 15.51% | 11.82% | 3.69% |
The Total Return per year is shown below for years of 5 to 30 to the end of 2018 in US$.
| From | Years | Div. Gth | Tot Ret | Cap Gain | Div. |
|---|---|---|---|---|---|
| 2013 | 5 | 6.45% | 10.08% | 7.10% | 2.98% |
| 2008 | 10 | 7.03% | 11.13% | 7.98% | 3.14% |
| 2003 | 15 | 9.36% | 9.18% | 6.44% | 2.74% |
| 1998 | 20 | 10.45% | 8.07% | 5.78% | 2.29% |
| 1993 | 25 | 11.14% | 13.58% | 10.26% | 3.32% |
| 1988 | 30 | 11.94% | 14.75% | 11.21% | 3.54% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 16.56, 18.65 and 21.15. The corresponding 10 year ratios are 16.13, 17.72 and 19.44. The corresponding historical median ratio are 16.52, 18.65 and 21.15. The current P/E 20.28 based on a stock price of $131.22 and 2019 EPS estimate of $6.47. This stock price testing suggests that the stock price is relatively reasonable but above the median.
I get a Graham Price of $56.42. The 10 year low, median, and high median Price/Graham Price Ratios are 1.47, 1.64 and 1.84. The current P/GP Ratio is 2.33 based on a stock price of $131.22. 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 3.49. The current P/B Ratio is 6.00 based on a Book Value of $58,210M, Book Value per Share of $21.86 and a stock price of $131.22. The current ratio is 72% higher than the 10 year ratio. This stock price testing suggests that the stock price is relatively expensive.
I get an historical median dividend yield of 2.28%. The current dividend yield is 2.90% based on $3.75 and a stock price of $131.22. The current yield is 27% above the historical median yield. This stock price testing suggests that the stock price is relatively cheap.
I get a 10 year median dividend yield of 3.06%. The current dividend yield at 2.90% is 5% lower than the 10 year median yield. This stock price testing suggests that the stock price is relatively reasonable but above the median.
The 10 year median Price/Sales (Revenue) Ratio is 3.47. The current P/S Ratio is 4.25 based on 2019 Revenue estimate of $82.218M, Revenue per Share of $30.88 and a stock price of $131.22. The current ratio is 22% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive.
Results of stock price testing is that the stock price is probably a bit on the expensive side. The best test is again the P/S Ratio test and this shows that the stock price is expensive. This test shows expensive when the current ratio is 20% or more above the 10 year median ratio. So, the stock price is not high above this level. The only test that shows the stock price is relatively cheap is the dividend yield one. The problem here is the DPR for EPS currently at 63% is relatively high compared to its historical median of 39%.
Is it a good company at a reasonable price? This certainly a good Dividend Growth Stock. The company has a long history of increasing their dividends. I have 30 years of data and they increased the dividend each of those years. A problem is that entry price is important and the current stock price seems a bit on the expensive side.
When I look at analysts’ recommendations, I find Strong Buy (6), Buy (4) and Hold (9). The consensus would be a Buy. The 12 month stock price consensus is $149.37. This implies a total return of 16.73% that includes 13.83% from capital gains and 2.90% from dividends based on a current stock price of $131.22.
See what analysts are saying on Stock Chase. Some think the law suits are a problem and others think not. Timothy Green on Motley Fool says further testing of JNJ’s baby powder showed no asbestos . Berkeley Lovelace on CNBC talks about JNJ third quarterly earnings. A writer on Simply Wall Street says that this is a good dividend stock. A writer on Simply Wall Street says the stock is undervalued.
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 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 Friday, November 15, 2019 around 5 pm. Tomorrow on my other blog I will write about Frontiers North and Polar Bears.... learn more on Thursday, November 14, 2019 around 5 pm.
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