Is it a good company at a reasonable price? This stock is part of the US Dividend Aristocrats and with its shareholders have received increasing dividends over a long period of time. It has not been a great performer over time, but it has been an acceptable one. If you buy US stocks, you should really use a US$ account so you can move money into and out of US$ when you chose. The problem with the TSX is that there are few Health Care stocks to chose from and this is a Health Care stock. People buy Health Care stocks for diversification. The stock price seems reasonable at this time.
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 both EPS and Net Income went up a lot in 2023 because of earnings from discontinued operations. They are expected to go closer to values of 2022 in 2024. For example, EPS climbed 104% in 2023 and is expected to go down by 47% in 2024. However, the EPS expected in 2024 is 7% higher than in 2022. Also, Revenue went down in 2023 because of the spin-off of Kenvue. See the Press Release. Revenue was down by 10% in 2023 and is expected to rise by 4% in 2024.
If you had invested in this company in December 2013, for $1,007.47 you would have bought 11 shares at $91.59 per share. In December 2023, after 10 years you would have received $404.69 in dividends. The stock would be worth $1,724.14. Your total return would have been $2,128.83. This would be a total return of 8.63% per year with 5.52% from capital gain and 3.11% from dividends. This is buying the stock in the US market using a US$ account.
| Cost | Tot. Cost | Shares | Years | Dividends | Stock Val | Tot Ret |
|---|---|---|---|---|---|---|
| $91.59 | $1,007.49 | 11 | 10 | $404.69 | $1,724.14 | $2,128.83 |
The current dividend yield is moderate (2% to 4% ranges) at 3.09%. The 5, 10 and historical median dividend yields are also moderate at 2.76%, 2.79% and 2.46%. The dividend increases for the last 5 years is low (less than 8% per year) at 5.8% per year. The last dividend increase was for 4.2% and it occurred in 2024.
The Dividend Payout Ratios (DPR) are fine. The DPR for 2023 for Earnings per Share (EPS) is good at 34% with 5 year coverage at 53%. The DPR for 2023 for Adjusted Earnings per Share (AEPS) is good at 47% with 5 year coverage at 45%. The DPR for 2023 for Cash Flow per Share (CFPS) is fine at 56% with 5 year coverage at 48%, but I prefer the rate to be 40% or less. The DPR for 2023 for Free Cash Flow (FCF) is fine at 65% with 5 year coverage at 58%.
| Item | Cur | 5 Years |
|---|---|---|
| EPS | 34.26% | 53.48% |
| AEPS | 47.38% | 45.35% |
| CFPS | 55.77% | 47.96% |
| FCF | 64.50% | 57.59% |
Debt Ratios are fine, but Liquidity Ratio is low. The Long Term Debt/Market Cap Ratio for 2023 is good at 0.07 and currently at 0.08. The Liquidity Ratio for 2023 is too low at 1.16 and 1.03 currently. If you added in Cash Flow after dividends, the ratios are still low at 1.40 and currently at 1.27. I prefer these ratios to be at 1.50 or higher. The Debt Ratio for 2023 is good at 1.70 and 1.65 currently. The Leverage and Debt/Equity Ratios for 2023 are fine at 2.44 and 1.44 and currently at 2.54 and 1.54.
| Type | Year End | Ratio Curr |
|---|---|---|
| Lg Term R | 0.07 | 0.08 |
| Intang/GW | 0.19 | 0.22 |
| Liquidity | 1.16 | 1.03 |
| Liq. + CF | 1.40 | 1.27 |
| Debt Ratio | 1.70 | 1.65 |
| Leverage | 2.44 | 2.54 |
| D/E Ratio | 1.44 | 1.54 |
The Total Return per year is shown below for years of 5 to 35 to the end of 2023 in US$. 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. |
|---|---|---|---|---|---|
| 2018 | 5 | 6.03% | 6.97% | 3.96% | 3.01% |
| 2013 | 10 | 6.37% | 8.63% | 5.52% | 3.11% |
| 2008 | 15 | 6.97% | 9.93% | 6.63% | 3.30% |
| 2003 | 20 | 8.99% | 8.73% | 5.81% | 2.92% |
| 1998 | 25 | 9.85% | 7.90% | 5.42% | 2.49% |
| 1993 | 30 | 10.50% | 12.86% | 9.19% | 3.67% |
| 1988 | 35 | 11.21% | 14.12% | 10.15% | 3.97% |
The Total Return per year is shown below for years of 5 to 35 to the end of 2023 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. |
|---|---|---|---|---|---|
| 2018 | 5 | 5.18% | 6.24% | 3.32% | 2.92% |
| 2013 | 10 | 8.48% | 11.32% | 7.84% | 3.47% |
| 2008 | 15 | 7.18% | 10.29% | 7.18% | 3.11% |
| 2003 | 20 | 8.59% | 8.59% | 5.94% | 2.66% |
| 1998 | 25 | 10.61% | 6.94% | 4.77% | 2.17% |
| 1993 | 30 | 10.22% | 12.70% | 9.17% | 3.54% |
| 1988 | 35 | 11.47% | 14.75% | 10.57% | 4.18% |
The 5-year low, median, and high median Price/Earnings per Share Ratios are 20.17, 24.17, and 26.01. The corresponding 10 year ratios are 19.88, 22.55 and 24.50. The corresponding historical ratios are 16.55, 19017 and 21.97. The current ratio is 22.29 based on a stock price of $160.61 and EPS estimate for 2024 of $7.20. This 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 also have Adjusted Earnings per Share (AEPS) data. The 5-year low, median, and high median Price/Adjusted Earnings per Share Ratios are 14.68, 16.72 and 18.31. The corresponding 10 year ratios are 14.62, 16.39 and 18.24. The corresponding 10 year ratios are 19.88, 22.55 and 24.50. The current ratio is 16.14 based on a stock price of $160.61 and AEPS estimate for 2024 of $9.95. This 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 $80.78. The 10-year low, median, and high median Price/Graham Price Ratios are 1.83, 2.04 and 2.26. The current ratio is 1.99 based on a stock price of $160.61. This 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 10-year median Price/Book Value per Share Ratio of 5.70. The current P/B Ratio is 5.51 based on a Book Value of $70,158M, Book Value per Share of $29.15 and a stock price of $160.61. The current ratio is 3% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I also have a Book Value per Share estimate for 2024 of $30.08. This implies a P/B Ratio of 5.34 with a Book Value of $72,405M, and a stock price of $160.61. This ratio is 6% 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 15.77. The current P/CF Ratio is 15.75 based on Cash Flow per Share estimate for 2024 of $10.20, Cash Flow of $24,552M and a stock price of $160.61. The current ratio is 0.2% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get an historical median dividend yield of 2.46%. The current dividend yield is 3.09% based on dividends of $4.96 and stock price of $160.61. The current dividend yield is 26% above the historical median dividend yield. 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 3.09% based on dividends of $4.96 and stock price of $160.61. The current dividend yield is 10% above the 10 year median dividend yield. 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 4.36. the current P/S Ratio is 4.35 based on Revenue estimate for 2024 of $88,786M, Revenue per Share of $36.89 and a stock price of $160.61. The current ratio is 0.2% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median. Results of stock price testing is that the stock price is pointing to a reasonable price that is below the median. The 10 year dividend yield test says that the stock price is reasonable and below the median. The P/S Ratio test confirms this. Practically all the testing is saying the same thing.
When I look at analysts’ recommendations, I find Strong Buy (7), Buy (3), and Hold (13). The consensus would be a Buy. The 12 months consensus stock price is $174.28 with a high of $215.00 and low of $155.00. The 12 month stock price of $174.28 implies a total return of 11.60% with 8.51% from capital gains and 3.09% from dividends based on a current stock price of $160.61.
Some analysts on Stock Chase like this stock and think it is a buy and other do not like it. Mainly it is not liked because of disappointing results and because Healthcare is a tough business. Stock Chase gives this company 5 stars out of 5. Tony Dong on Motley Fool thinks you should buy this stock as it has increased its dividends for over 50 consecutive years. Kay Ng on Motley Fool thinks you should own this conservative stock in your RRSP. The company put out a Press Release about their fourth quarter of 2023. The company put out a Press Release about their third quarter of 2024.
There is a Bloomberg report on Yahoo Finance about the Talc Court case. Simply Wall Street via Yahoo Finance reviews this stock. Simply Wall Street has one warning on this stock of large one-off items impacting financial results. This is why your have Adjusted Earnings per Share.
Johnson & Johnson's biggest strength is its diversified business model. It operates through pharmaceuticals, and medical devices divisions. They sold off their consumer products divisions. 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 4, 2024 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.
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