Sound bite for Twitter and StockTwits is: Dividend Growth Consumer. Results of stock price testing is that the stock price is probably reasonable. Debt Ratios currently are an improvement over those of 2022 for Liquidity and rest are fine. Some Dividend Payout Ratios (DPR) are fine, but the Cash Flow per Share ratios are too high. The current dividend yield is moderate with dividend growth low. See my spreadsheet on Johnson and Johnson.
Is it a good company at a reasonable price? There seems to be a lot of disagreements on whether this is a good stock to buy and hold currently. If you do buy it as a Canadian, I would use a US$ account. Then you do not have to deal with currency exchange. Currently, I do not hold any US stocks and I have no intensions of buying any in the near future. According to my testing the stock price seems reasonable.
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 I did look at 5 year total returns from 199 to 2022. For the years 2003 to 2012, this stock underperformed. I think that this sort of stock should produce a total return of 8% per year, part from capital gain and part from dividends. See chart below.
| Date | Tot. Ret | Beg Yield | Beg P/S | Beg P/E |
|---|---|---|---|---|
| 12/31/99 | 21.28% | 2.06% | 2.24 | 17.55 |
| 12/31/00 | 21.28% | 1.50% | 2.94 | 22.98 |
| 12/31/01 | 20.38% | 1.45% | 3.11 | 23.82 |
| 12/31/02 | 11.93% | 1.31% | 3.85 | 27.72 |
| 12/31/03 | 5.42% | 1.16% | 4.70 | 39.54 |
| 12/31/04 | 7.89% | 1.17% | 4.56 | 31.72 |
| 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 |
| 12/31/21 | 11.01% | 2.73% | 4.34 | 19.43 |
| 12/31/22 | 7.39% | 2.38% | 4.90 | 297.28 |
| Current | 3.20% | 6.69 | 22.09 |
If you had invested in this company in December 2012, for $1,051.50 you would have bought 15 shares at $70.10 per share. In December 2022, after 10 years you would have received $520.20 in dividends. The stock would be worth $2,649.75. Your total return would have been $3,169.95. This is a total return would be a total gain of 12.94% per year with 9.68% from capital gain and 3.26% from dividends. This is all in US$.
| Cost | Tot. Cost | Shares | Years | Dividends | Stock Val | Tot Ret |
|---|---|---|---|---|---|---|
| $70.10 | $1,051.50 | 15 | 10 | $520.20 | $2,649.75 | $3,169.95 |
The current dividend yield is moderate with dividend growth low. The current yield is moderate (2% to 4% ranges) at 3.15%. The 5, 10 and historical dividend yields are also moderate at 2.65%, 2.79% and 2.44%. The dividends have grown at a low rate (below 8% per year) at 6.03% per year over the past 5 years. The last dividend increase was in 2023 and it was for 5.3%.
Some Dividend Payout Ratios (DPR) are fine, but the Cash Flow per Share ratios are too high. The DPR for 2022 for Earnings per Share (EPS) is 66% with 5 year coverage at 64%. The DPR for 2022 for Adjusted Earnings per Share (AEPS) is 44% with 5 year coverage at 45%. The DPR for 2022 for Cash Flow per Share (CFPS) is 67% with 5 year coverage at 49%. These are too high and I prefer them to be 40% or lower. The DPR for 2022 for Free Cash Flow (FCF) is 68% with 5 year coverage at 55%.
| Item | Cur | 5 Years |
|---|---|---|
| EPS | 66.12% | 63.63% |
| AEPS | 43.84% | 44.53% |
| CFPS | 67.33% | 48.79% |
| FCF | 67.98% | 55.04% |
Debt Ratios currently are an improvement over those of 2022 for Liquidity and rest are fine. The Long Term Debt/Market Cap Ratio for 2022 is good at 0.05. The Liquidity Ratio for 2022 is low at 0.99 and 1.12 currently. If you add in Cash Flow after dividends currently, the result is a ratio of 1.51, which is fine. The Debt Ratio for 2022 is good at 1.69. The Leverage and Debt/Equity Ratios for 2022 are fine at 2.44 and 1.44 and are currently good at 2.51 and 1.51.
| Type | Year End | Ratio Curr |
|---|---|---|
| Lg Term R | 0.05 | 0.06 |
| Intang/GW | 0.12 | 0.16 |
| Liquidity | 0.99 | 1.12 |
| Liq. + CF | 1.07 | 1.51 |
| Debt Ratio | 1.69 | 1.66 |
| Leverage | 2.44 | 2.51 |
| D/E Ratio | 1.44 | 1.51 |
The Total Return per year is shown below for years of 5 to 34 to the end of 2022 in CDN$. 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. This if held in an CDN$ account, which I would never suggest.
| From | Years | Div. Gth | Tot Ret | Cap Gain | Div. |
|---|---|---|---|---|---|
| 2017 | 5 | 7.67% | 8.98% | 9.06% | 2.63% |
| 2012 | 10 | 9.68% | 5.38% | 16.77% | 3.67% |
| 2007 | 15 | 9.24% | 11.87% | 8.98% | 2.90% |
| 2002 | 20 | 8.16% | 7.40% | 5.38% | 2.02% |
| 1997 | 25 | 10.47% | 8.99% | 6.79% | 2.19% |
| 1992 | 30 | 9.62% | 10.78% | 8.32% | 2.45% |
| 1988 | 34 | 11.73% | 15.18% | 11.36% | 3.81% |
The Total Return per year is shown below for years of 5 to 34 to the end of 2022 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. |
|---|---|---|---|---|---|
| 2017 | 5 | 6.03% | 7.39% | 4.80% | 2.59% |
| 2012 | 10 | 6.37% | 12.94% | 9.68% | 3.26% |
| 2007 | 15 | 6.97% | 9.47% | 6.71% | 2.76% |
| 2002 | 20 | 8.99% | 8.68% | 6.19% | 2.49% |
| 1997 | 25 | 9.85% | 9.46% | 7.01% | 2.45% |
| 1992 | 30 | 10.50% | 12.16% | 9.19% | 2.96% |
| 1988 | 34 | 11.21% | 14.49% | 10.85% | 3.64% |
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 19.88, 22.55 and 24.50. The corresponding historical ratios are 16.56, 19.62 and 22.62. The current P/E Ratio is 22.45 based on a stock price of $151.29 and EPS estimate for 2023 of $6.73. The current P/E Ratio is between the low and median ratio of the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I also have Adjusted Earnings per Share (AEPS) data. The 5-year low, median, and high median Price/Adjusted Earnings per Share Ratios are 14.60, 16.72 and 18.31. The corresponding 10 year ratios are 14.54, 16.35 and 18.19. The current P/AEPS Ratio is 14.99 based on a stock price of $151.29 and AEPS estimate for 2023 of $10.09. The current ratio is between the low and median ratios of the 10 year median ratios. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get a Graham Price of $55.08. The 10-year low, median, and high median Price/Graham Price Ratios are 2.11, 2.41 and 2.64. The current P/GP Ratio is 2.75 based on a stock price of $151.29. The current ratio is above the high ratio of the 10 year median ratios. 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 5.64. The current ratio is 5.14 based on a stock price of $151.29, Book Value of $76,409M and Book Value per Share of $29.41. The current ratio is 8.8% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median. Note that the P/B Ratios are very high. This means that the breakup value of the company is far lower than the stock price. This also tells you that the stock price is expensive.
I also have Book Value per Share estimate for 2023 of $30.70. This implies a Book Value of $79,763 and a P/B Ratio of 4.93 for a stock price of $151.29. This ratio is 13% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get a 10-year median Price/Cash Flow per Share Ratio of 7.17. The current P/CF Ratio is 14.83 based on a stock price of $151.29, Cash Flow per Share estimate for 2023 of $10.20 and a Cash Flow of $26,501M. The current ratio is 107% 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 2.44%. The current dividend yield is 3.15% based on a stock price of $151.29 and dividends of $4.76. The current ratio is 29% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap.
I get a 10 year median dividend yield of 2.79%. The current dividend yield is 3.15% based on a stock price of $151.29 and dividends of $4.76. The current ratio is 13% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median.
The 10-year median Price/Sales (Revenue) Ratio is 4.32. The current P/S Ratio is 4.64 based on Revenue estimate for 2023 of $84,752M, Revenue per Share of $32.62 and a stock price of $151.29. This ratio is 7.3% 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 probably reasonable. The 10 year median dividend yield test says it is reasonable and below the median and the P/S Ratio test says it is reasonable but above the median. Most of the rest of the testing says reasonable and below the median except for the P/GP Ratio. Another thing to mention is the high P/B Ratios.
When I look at analysts’ recommendations, I find Strong Buy (11), Buy (3), Hold (4), Underperform (1) and Sell (3). This is interest and seldom do I see such wide spread opinions. What bothers some analysts is the lawsuits over baby powder causing cancel.
There are lots of buy recommendations on Stock Chase, but a number of analysts are worried about the company and especially the outstanding lawsuits. Stock Chase gives this stock 5 stars out of 5. This stock is on the American Dividend Aristocrat list. David Jagielski on Motley Fool says be careful as this stock may not be as safe and you think. Matthew DiLallo on Motley Fool thinks you can buy and hold this stock for a lifetime. The company put out a Press Release on their year-end 2022 results. The company put out a Press Release on their second quarter of 2023 results.
Zacks via Yahoo Finance put out a recent report on this stock. Simply Wall Street gives this stock 4 stars out of 5. They have two warnings of profit margins (14.2%) are lower than last year (21.1%); and large one-off items impacting financial results.
Johnson & Johnson's biggest strength is its diversified business model. It operates through pharmaceuticals, medical devices, and consumer products divisions. Its diversification helps it to withstand economic cycles more effectively. J&J has one of the largest research and development (R&D) budget among pharma companies. J&J's worldwide business is divided into three segments: Pharmaceutical, Medical Devices and Consumer. 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 Innergex Renewable Energy (TSX-INE, OTC-INGXF) ... learn more on Monday, November 06, 2023 around 5 pm.
This blog is meant for educational purposes only and is not to provide investment advice. I am not a licensed professional investment advisor. 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 site for an index to these blog entries and for stocks followed. 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. I am on Instagram. Or you can just Google #walktoronto spbrunner8166 to see my pictures.
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