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. I bought at the wrong time.
When I was updating my spreadsheet, I noticed the stock price has made a good recovery from March lows and is only down 2.5% this year. However, estimates are down for 2020 from last year. For example, Revenue is now expected to be $81,814M for 2020, last the Revenue for 2020 was expected to come in at $85,294M. Note that revenue given last year for 2019 was $82,218M, but it came in only slightly lower at $82,059.
One of the things I look at for foreign investing is the 5 year total return per year for years ending over a period of time. I have the 5 year total return on this stock from 1998 and 2019. For example, for 1998 I have the 5 year total return between 1993 and 1998. Most 5 year periods, Canadian investors have done well, but they would have had extremely low or negative returns between the 5 years ending in 2003 and 2011. For US investors during this period, the 5 year total returns were low, but not as bad as for Canadian investors. This is because the Canadian Dollar was strong in these years.
The dividend yields are moderate with dividend growth currently low. The current dividend yield is moderate (2% to 4%) at 2.75%. The 5, 10 and historical median dividend yields are also moderate at 2.76%, 2.92% and 2.28%. The dividend growth over the past 5 years has been low (under 8%) at 6.32% per year. The last dividend increase was in 2020 and it was for 6.3%.
The Dividend Payout Ratios (DPR) are on the high side. The DPR for EPS for 2019 was 67% with 5 year coverage at 72%. The DPR for CFPS was 54% with 5 year coverage at 50%. Both these DPRs are on the high side. The DPR for Free Cash Flow was 50% with 5 year coverage at 52%.
Debt Ratios are fine. The Long Term Debt/Market Cap Ratio for 2019 is low and quite good at 0.07. The Liquidity Ratio for 2019 is lower than normal at 1.26 with the 5 year median at 1.50. The Debt Ratio is good at 1.61. The Leverage and Debt/Equity Ratios are fine at 2.65 and 1.65.
The Total Return per year is shown below for years of 5 to 31 to the end of 2019 in CDN$. 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. |
|---|---|---|---|---|---|
| 2014 | 5 | 8.75% | 12.39% | 9.33% | 3.06% |
| 2009 | 10 | 9.16% | 13.96% | 10.85% | 3.11% |
| 2004 | 15 | 9.10% | 8.56% | 6.24% | 2.32% |
| 1999 | 20 | 9.43% | 7.18% | 5.20% | 1.97% |
| 1994 | 25 | 10.60% | 12.59% | 9.63% | 2.95% |
| 1989 | 30 | 11.90% | 14.01% | 10.75% | 3.26% |
| 1988 | 31 | 12.16% | 15.41% | 11.69% | 3.73% |
The Total Return per year is shown below for years of 5 to 31 to the end of 2019 in US$. 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. |
|---|---|---|---|---|---|
| 2014 | 5 | 6.32% | 9.67% | 6.88% | 2.79% |
| 2009 | 10 | 6.87% | 11.58% | 8.52% | 3.06% |
| 2004 | 15 | 8.55% | 8.20% | 5.71% | 2.49% |
| 1999 | 20 | 10.12% | 8.11% | 5.87% | 2.24% |
| 1994 | 25 | 10.90% | 13.06% | 9.93% | 3.14% |
| 1989 | 30 | 11.58% | 13.57% | 10.44% | 3.13% |
| 1988 | 31 | 11.74% | 14.78% | 11.27% | 3.50% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 21.28, 23.82 and 26.01. The corresponding 10 year ratios are 16.33, 17.99 and 19.63. The corresponding historical ratios are 15.53, 18.68 and 21.24. The current P/E Ratio is 24.20 based on a stock price of $147.11 and EPS estimate for 6.08. This stock price testing suggests that the stock price is relatively expensive.
I get a Graham Price of $57.88. The 10 year low, median, and high median Price/Graham Price Ratios are 1.57, 1.74 and 1.90. The current P/GP Ratio is 2.54 based on a stock price $147.11. 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 3.86. The current P/B Ratio is 6.01 based on a Book Value of $64,473M, Book Value per Share of $24.49 and a stock price of $147.11. The current ratio is 56% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive.
I get a 10 year median Price/Cash Flow per Share Ratio of 6.20. The current P/CF Ratio is 19.13 based on Cash Flow per Share estimate for 2020 of $7.69, Cash Flow of $20,244M and a stock price of $147.11. The current ratio is 218% above the 10 year median 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 2.75% based on dividends of $4.04 and a stock price of $147.11. The current dividend yield is 19% above historical median dividend yield. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get a 10 year median dividend yield of 2.92%. The current dividend yield is 2.75% based on dividends of $4.04 and a stock price of $147.11. The current dividend yield is 6% below 10 year median dividend 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 3.77. The current P/S Ratio is 4.73 based on a stock price of $147.11, Revenue estimate for 2020 of $81,814 and Revenue per Share of $31.08. The current ratio is 26% above the 10 year 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 relatively expensive. The dividend yield tests are showing the stock price as reasonable and above and below the median. However, this is not confirmed by the P/S Ratio test. All of the other tests show that the stock price is relatively expensive.
Is it a good company at a reasonable price? This stock has done well for shareholders over the longer term. Unfortunately, the current price seems to be on the high side. But last year the testing showed the stock price as above the median or expensive except for the dividend yield tests. The stock did well over the past year.
When I look at analysts’ recommendations, I find Strong Buy (8), Buy (4) and Hold (6). The Consensus would be a Buy. The 12 month stock price consensus is $165.38. This implies a total return of 15.17% with 12.42% from capital gains and 2.75% from dividends based on a current price of $147.11.
When I looked at analysts’ recommendations last year, I found 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. The stock price this year is $147.11, and this is not far off the consensus stock price of $149.37 of last year. Last year my analysis showed the stock price to be on the expensive side also.
It is interesting that analysts have differing views of this stock on Stock Chase. John Bromels on Motley Fool talks of three dividend stocks to love which includes this stock. A writer on Simply Wall Street calculates the intrinsic value of this stock to be $181.21 US$. A writer on Simply Wall Street says that the company’s high P/E Ratio maybe justified because analysts expect a future rise in EPS. The blogger on Old School Value does an analysis of this 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 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 13, 2020 around 5 pm. Tomorrow on my other blog I will write about Investing Books.... learn more on Tuesday, November 10, 2020 around 5 pm.
Also, on my book blog I have put a review of the book Seeking Virtue in Finance by JC de Swaan learn more...
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