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 that analysts keep thinking that Revenue is going to take off, especially in 2020. See chart below. The years column is year of estimates and the rows are showing the estimates in the first few rows and the actuals in the last row. So, estimates in 2018 are $81,366M, $82,870M and $86,759M for Revenue. Revenue growth has been low with growth only at 3.34% and 2.98% per year over the past 5 and 10 years. Revenue might be taking off in 2021. Estimate in 2021 is Revenue at $94,279. Over the past 9 months to September Quarter, revenue is $91.446.
| Years | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 |
|---|---|---|---|---|---|---|
| 2018 | $81,366 | $82,870 | $86,759 | |||
| 2019 | $82,221 | $85,294 | $89,527 | |||
| 2020 | $81,814 | $88,334 | $92,567 | |||
| 2021 | $94,279 | $97,743 | $101,520 | |||
| Actuals | $81,581 | $82,059 | $82,584 | $91,446 |
When I was updating my spreadsheet, I noticed that this spreadsheet had total return every 5 years starting in 1995. I noticed that between 2005 and 2012 inclusive, the 5 year total return was low. Also, looking at long term total return, the shareholders who bought 20 years ago have the worse total return at 7.87% in US$. See the chart below. This first chart is in US$ and the second one in CDN$.
In US$ total returns from 1999 to 2000 with beginning dividend yield, P/S Ratio and P/E Ratio. So, for the 5 year return to December 31, 2005, the values 5 years earlier was a yield at 1.18%, the P/E was at 5.05 and the P/E was at 32.63. The 5 year Total Return to December 31, 2005 was 4.44%.
| Date | Tot. Ret | Beg Yield | Beg P/S | Beg P/E |
|---|---|---|---|---|
| 12/31/99 | 29.69% | 2.06% | 2.24 | 17.55 |
| 12/31/00 | 21.28% | 1.50% | 2.94 | 22.98 |
| 12/31/05 | 4.44% | 1.18% | 5.05 | 32.63 |
| 12/31/06 | 3.75% | 1.17% | 5.56 | 32.53 |
| 12/31/07 | 6.82% | 1.50% | 4.35 | 24.59 |
| 12/31/08 | 6.05% | 1.83% | 3.59 | 21.09 |
| 12/31/09 | 2.83% | 1.73% | 3.98 | 22.33 |
| 12/31/10 | 3.52% | 2.12% | 3.71 | 17.37 |
| 12/31/11 | 2.79% | 2.20% | 3.59 | 17.71 |
| 12/31/12 | 4.07% | 2.43% | 3.12 | 18.37 |
| 12/31/13 | 12.04% | 3.00% | 2.61 | 13.10 |
| 12/31/14 | 13.27% | 3.00% | 2.87 | 14.64 |
| 12/31/15 | 14.06% | 3.41% | 2.75 | 12.96 |
| 12/31/16 | 15.30% | 3.43% | 2.75 | 18.79 |
| 12/31/17 | 18.01% | 3.42% | 2.90 | 18.16 |
| 12/31/18 | 10.08% | 2.83% | 3.62 | 19.04 |
| 12/31/19 | 9.67% | 2.64% | 3.92 | 18.35 |
| 12/31/20 | 11.82% | 2.87% | 4.04 | 18.74 |
| Current | 2.57% | 4.61 | 19.92 |
In CDN$ total returns from 1999 to 2000 with beginning dividend yield, P/S Ratio and P/E Ratio. The difference between the US$ and CDN$ returns is the exchange rate.
| Date | Tot. Ret | Beg Yield | Beg P/S | Beg P/E |
|---|---|---|---|---|
| 12/31/99 | 31.22% | 2.06% | 2.24 | 17.55 |
| 12/31/00 | 23.89% | 1.50% | 2.94 | 22.98 |
| 12/31/05 | -0.97% | 1.18% | 5.05 | 32.63 |
| 12/31/06 | -2.59% | 1.17% | 5.56 | 32.53 |
| 12/31/07 | -2.78% | 1.50% | 4.35 | 24.59 |
| 12/31/08 | 4.70% | 1.83% | 3.59 | 21.09 |
| 12/31/09 | 0.07% | 1.73% | 3.98 | 22.33 |
| 12/31/10 | 0.45% | 2.12% | 3.71 | 17.37 |
| 12/31/11 | 0.07% | 2.20% | 3.59 | 17.71 |
| 12/31/12 | 4.45% | 2.43% | 3.12 | 18.37 |
| 01/11/13 | 8.67% | 3.00% | 2.61 | 13.10 |
| 12/31/14 | 15.35% | 3.00% | 2.87 | 14.64 |
| 12/31/15 | 21.52% | 3.41% | 2.75 | 12.96 |
| 12/31/16 | 21.71% | 3.43% | 2.75 | 18.79 |
| 12/31/17 | 23.84% | 3.42% | 2.90 | 18.16 |
| 12/31/18 | 15.88% | 2.83% | 3.62 | 19.04 |
| 12/31/19 | 12.39% | 2.64% | 3.92 | 18.35 |
| 12/31/20 | 10.35% | 2.87% | 4.04 | 18.74 |
The dividend yields are moderate with dividend growth low. The current dividend yield is moderate (2% to 4% ranges) at 2.57%. The 5, 10 and historical dividend yields are also moderate at 2.76%, 2.91% and 2.29%. The dividends have been increasing at the rate of 6.17% per year over the past 5 years. This is below the 8% ranges and so is low. The last dividend increase was 2021 and it was for 5%.
The Dividend Payout Ratios (DPR) should be improving. The DPR for EPS for 2020 is 72% with 5 year coverage at 77%. Analysts expect it to go lower in the future at 51% next year and then 48% in 2022. The DPR for CFPS is 50% in 2020 with 5 year coverage at 51%. This is also a bit high. The DPR for Free Cash Flow is 52% with 5 year coverage also at 52%.
Debt Ratios are fine. The Long Term Debt/Market Cap Ratio for 2020 is 0.08 and is good. The Liquidity Ratio for 2020 is quite low at 1.21, but if you add in cash flow after dividends, it is better at 1.51. The Debt Ratio is good at 1.57. The Leverage and Debt/Equity Ratios are fine at 2.76 and 1.76.
The Total Return per year is shown below for years of 5 to 32 to the end of 2020 in CDN$. Under the Capital Gain column is the portion of the Total Return attributable to capital gains. Under the Dividend column is the portion of the Total Return attributable to dividends. See chart below.
| From | Years | Div. Gth | Tot Ret | Cap Gain | Div. |
|---|---|---|---|---|---|
| 2015 | 5 | 4.82% | 10.34% | 7.52% | 2.82% |
| 2010 | 10 | 9.41% | 16.20% | 12.72% | 3.49% |
| 2005 | 15 | 8.68% | 9.96% | 7.42% | 2.55% |
| 2000 | 20 | 8.87% | 6.72% | 4.80% | 1.92% |
| 1995 | 25 | 10.38% | 10.58% | 8.09% | 2.49% |
| 1990 | 30 | 11.61% | 13.74% | 10.49% | 3.25% |
| 1988 | 32 | 11.96% | 15.33% | 11.57% | 3.76% |
The Total Return per year is shown below for years of 5 to 32 to the end of 2020 in US$. 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. |
|---|---|---|---|---|---|
| 2015 | 5 | 6.17% | 11.82% | 8.91% | 2.91% |
| 2010 | 10 | 6.55% | 13.01% | 9.77% | 2.68% |
| 2005 | 15 | 7.88% | 9.30% | 6.63% | 2.23% |
| 2000 | 20 | 9.74% | 7.87% | 5.64% | 2.65% |
| 1995 | 25 | 10.61% | 10.96% | 8.31% | 3.07% |
| 1990 | 30 | 11.19% | 13.14% | 10.07% | 3.53% |
| 1988 | 32 | 11.56% | 14.70% | 11.17% | 3.53% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 21.28, 24.17 and 26.35. The corresponding 10 year Ratios are 16.54, 18.32 and 20.47. The corresponding historical ratios are 16.55, 18.72 and 21.32. The current P/E Ratio is 19.92 based on a stock price of $165.12, EPS estimate for 2021 of $8.29. the current ratio is between the median and high ratios for the 10 year median ratios. This stock price testing suggests that the stock price is relatively reasonable but above the median.
I get a Graham Price of $65.59. The 10 year low, median, and high median Price/Graham Price Ratios are 1.62, 1.81 and 2.03. The current P/GP Ratio is 2.44 based on a stock price of $165.12. The current ratio is above the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive. The P/GP Ratios are quite high in absolute terms. A cheap price is a P/GP of 1.00 and a reasonable ratio would be 1.50.
I get a 10 year median Price/Book Value per Share Ratio of 4.08. The current P/B Ratio is 6.74 based on a Book Value of $64,473M, Book Value per Share of $24.49, and a stock price of $165.12. The current ratio is 65% above the 10 year median ratio. These ratios are also quite high, when a reasonable one is considered to be 1.50.
I get a 10 year median Price/Cash Flow per Share Ratio of 6.31. The current P/CF Ratio is 18.03 based on Cash Flow per Share estimate for 2021 of $9.16, Cash Flow of $24,114M and a stock price of $165.12. The current ratio is above the 10 year median ratio by 186%. This stock price testing suggests that the stock price is relatively expensive.
I get an historical median dividend yield of 2.30%. The current dividend yield is 2.57% based on dividends of $4.24 and a stock price of $165.12. The current dividend yield is 12% above the historical dividend yield. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get n 10 year median dividend yield of 2.91%. The current dividend yield is 2.57% based on dividends of $4.24 and a stock price of $165.12. The current dividend yield is 12% below the historical 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 4.02. The current P/S Ratio is 4.61 based on a stock price of $165.12, Revenue estimate for 2021 of $94,279 and Revenue per Share of $35.81. The current ratio is 15% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable but above the median.
Results of stock price testing is that the stock price is? The stock price seems to be in the reasonable category. The dividend testing puts it above and below the median, with the P/S Ratio testing, but the stock price above the median. The DPRs for this stock is on the high side. If you compare the current values of Dividend Yield, P/S Ratio and P/E Ratio to 5 year returns, it probably shows a low positive total return.
Is it a good company at a reasonable price? The stock price still seems reasonable, but a bit on the high side of the reasonable range. Also, the P/GP Ratio and P/B Ratio have high values. However, this company has been profitable for shareholders for a long time. It would be a good way for Canadians to diversify into the Health Care sector.
When I look at analysts’ recommendations, I find Strong Buy (8), Buy (2) and Hold (8). The consensus would be a Buy. The 12 month stock price consensus is $186.06. This implies a total return of 15.25% with 12.68% from capital gains and 2.57% from dividends based on a current stock price of $165.12.
Most analysts on Stock Chase think this stock is a buy. Rachel Warren And Brian Withers talk on Motley Fool about this stock. Rachel Warrant thinks it is good stock to buy and hold. The Executive Summary on Simply Wall Street gives this stock 4 stars out of 5 and list 2 risks. A writer on Simply Wall Street says JNJ is cheap and its intrinsic value is $251.94. A writer on Simply Wall Street says the combination of rising EPS and insider ownership appeals to him. Insider Monkey on Yahoo Finance says 88 hedge funds hold JNJ.
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 05, 2021 around 5 pm. Tomorrow on my other blog I will write about Something to Buy November 2021.... learn more on Thursday, November 4, 2021 around 5 pm.
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