Is it a good company at a reasonable price? This is a dividend growth stock with total return on the low side. I like companies that deliver around 8% per year in total return which includes dividends and capital gains. This company sort of does this.
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 much 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 a big drop in EPS from last year of 58%. This difference is Net earnings from discontinued operations, net of tax. The EPS from 2024 is down 14% from 2022 at 5.79. EPS next year is expected to be $11.06, an increase of 91%, but both the EPS for 2026 and 2027 are lower at $9 48 and $10.83.
Note that this stock is being sold in Canada as Johnson & Johnson CDR (CAD HEDG (JNJ.NE). It is a Canadian-dollar-denominated and Canadian-dollar-hedged structure that represents shares of Johnson & Johnson (JNJ), a global healthcare company, and trades on the NEO Exchange in Canada. The "CDR" stands for Canadian Depositary Receipt, and the "CAD HEDG" indicates the investment is denominated in Canadian dollars and its currency exchange rate fluctuations relative to the U.S. dollar are hedged to reduce risk for Canadian investors.
If you had invested in this company in December 2014, for $1,045.70 you would have bought 10 shares at $104.57 per share. In December 2024, after 10 years you would have received $389.40 in dividends. The stock would be worth $1,446.20. Your total return would have been $1,835.60. This would be a total return of 6.46% per year with 3.30% from capital gain and 3.16% from dividends.
| Cost | Tot. Cost | Shares | Years | Dividends | Stock Val | Tot Ret |
|---|---|---|---|---|---|---|
| $104.57 | $1,045.70 | 10 | 10 | $389.40 | $1,446.20 | $1,835.60 |
The current dividend yield is moderate with dividend growth low. The current dividend yield is moderate (2% to 4% ranges) at 2.79%. The 5, 10 and historical median dividend yields are also moderate at 2.88%, 2.80% and 2.47%. The dividend growth is low (below 8% per year) at 5.5% per year over the past 5 years. The last dividend increase was in 2025 and it was for 4.8%.
The Dividend Payout Ratios (DPR) need some improvement. The DPR for 2024 for Earnings per Share (EPS) is too high at 85% with 5 year coverage at 124%. The DPR for 2024 for Adjusted Earnings per Share (AEPS) is good at 49% with 5 year coverage at 47%. The DPR for 2024 for Cash Flow per Share (CFPS) is high at 53% with 5 year coverage at 107%. I like to see this DPR at 40% or lower. The DPR for 2024 for Free Cash Flow (FCF) is high at 60% with 5 year coverage at 60%. There is agreement on what the FCF is at $19,842M for 2024. Analysts expect that the DPRs for EPS will be better in 2025.
| Item | Cur | 5 Years |
|---|---|---|
| EPS | 84.80% | 124.19% |
| AEPS | 49.20% | 46.55% |
| CFPS | 52.69% | 107.21% |
| FCF | 59.59% | 59.64% |
Debt Ratios are fine, but I would like to see the Liquidity Ratio improved. The Long Term Debt/Market Cap Ratio for 2024 is good at 0.09 and currently at 0.09. The Liquidity Ratio for 2024 is low at 1.11 and 1.07 currently. If you added in Cash Flow after dividends, the ratios are still low at 1.36 and currently at 1.47. You want this ratio at 1.50 or higher. The Debt Ratio for 2024 is good at 1.66 and 1.70 currently. The Leverage and Debt/Equity Ratios for 2024 are fine at 2.52 and 1.52 and currently at 2.43 and 1.43.
| Type | Year End | Ratio Curr |
|---|---|---|
| Lg Term R | 0.09 | 0.09 |
| Intang/GW | 0.24 | 0.22 |
| Liquidity | 1.11 | 1.07 |
| Liq. + CF | 1.36 | 1.47 |
| Debt Ratio | 1.66 | 1.70 |
| Leverage | 2.52 | 2.43 |
| D/E Ratio | 1.52 | 1.43 |
The Total Return per year is shown below for years of 5 to 36 to the end of 2024 in CDN$ if bought in an CDN$ account. 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. |
|---|---|---|---|---|---|
| 2019 | 5 | 7.72% | 8.22% | 1.89% | 6.33% |
| 2014 | 10 | 8.24% | 10.46% | 5.54% | 4.91% |
| 2009 | 15 | 8.68% | 12.32% | 7.78% | 4.54% |
| 2004 | 20 | 8.75% | 8.49% | 5.14% | 3.35% |
| 1999 | 25 | 11.18% | 7.34% | 4.53% | 2.81% |
| 1994 | 30 | 10.11% | 12.09% | 8.30% | 3.79% |
| 1989 | 35 | 11.29% | 13.52% | 9.44% | 4.08% |
| 1988 | 36 | 11.53% | 14.86% | 10.27% | 4.59% |
The Total Return per year is shown below for years of 5 to 36 to the end of 2024 in US$ if bought in an US$ account. 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. |
|---|---|---|---|---|---|
| 2019 | 5 | 5.54% | 6.33% | -0.17% | 6.50% |
| 2014 | 10 | 5.93% | 8.13% | 3.30% | 4.83% |
| 2009 | 15 | 6.42% | 10.08% | 5.54% | 4.54% |
| 2004 | 20 | 7.79% | 7.83% | 4.21% | 3.62% |
| 1999 | 25 | 9.19% | 7.84% | 4.63% | 3.21% |
| 1994 | 30 | 9.99% | 12.33% | 8.18% | 4.16% |
| 1989 | 35 | 10.70% | 12.96% | 8.85% | 4.10% |
| 1988 | 36 | 10.86% | 14.13% | 9.61% | 4.52% |
The 5-year low, median, and high median Price/Earnings per Share Ratios are 20.17, 24.37 and 27.64. The corresponding 10 year ratios are 20.73, 23.99 and 26.18. The corresponding historical ratios are 16.56, 19.62 and 22.62. The current P/E Ratio is 16.85 based on a stock price of $186.40 and EPS estimate for 2025 of $11.06. This P/E Ratio is below the low ratio of the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap.
I also have Adjusted Earning 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 historical ratios are 14.48, 16.33 and 18.07. The current P/E Ratio is 17.15 based on a stock price of $186.40 and EPS estimate for 2025 of $10.87. This P/E Ratio is between the median and high ratios of 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 $89.77. The 10-year low, median, and high median Price/Graham Price Ratios are 1.83, 2.04 and 2.26. The current ratio is 2.08 based on a stock price of $186.40. This P/E Ratio is between the median and high ratios of the 10 year median ratios. This stock price testing suggests that the stock price is relatively reasonable but above the median.
I get a 10-year median Price/Book Value per Share Ratio of 5.70. The current P/B Ratio is 5.66 based on a Book Value of $79,277M, Book Value per Share of $32.95 and a stock price of $186.40. The current ratio is 0.7% 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 Ratio is very high which means that compared to the stock price, the Book Value is very low. A good ratio is 1.50 compared to this company’s ratio of 5.66.
I also have a Book Value per Share estimate for 2025 of $32.63. This implies a ratio of 5.71 with a stock price of $186.40 and Book Value of $78,514M. This ratio is 0.2% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable but at the median.
I get a 10-year median Price/Cash Flow per Share Ratio of 15.77. The current ratio is 13.69 based on Cash Flow per Share estimate for 2025 of $13.62 and a stock price of $186.40. The current 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. Note that this estimate is some 35% above the Cash Flow per Share of 2024.
I get an historical median dividend yield of 2.47%. The current dividend yield is 2.79% based on dividends of $5.20 and a stock price of $186.40. The current dividend yield is 13% above the 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 2.80%. The current dividend yield is 2.79% based on dividends of $5.20 and a stock price of $186.40. The current dividend yield is 0.5% below the historical median dividend yield. This stock price testing suggests that the stock price is relatively reasonable and at the median.
The 10-year median Price/Sales (Revenue) Ratio is 4.36. The current P/S Ratio is 4.78 based on a Revenue estimate for 2025 of $93,751M, Revenue per Share of $38.96 and a stock price of $186.40. The current ratio is 10% 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 still reasonable. The 10 year median dividend yield test show the stock price basically at the median. The P/S Ratio test is saying that the stock price is reasonable but above the median. The rest of the testing mostly shows that the stock price is reasonable and below, at or above the median.
When I look at analysts’ recommendations, I find Strong Buy (9), Buy (3), Hold (11) and Underperform (1). The consensus would be a Buy. The 12 month stock price consensus is $199.50 with a high of $225.00 and low of $155.00. The consensus stock price of $199.50 implies a total return of 9.82% with 7.03% from capital gains and 2.79% from dividend
There are lots of entries on Stock Chase for this stock. There is a big range from Top Pick to Do Not Buy. One analyst said it had an underwhelming performance, but popped on earnings. A couple of analysts mention the legal overhand of its talcum powered allegedly causing ovarian cancer. Kay Ng on Motley Fool says that Johnson & Johnson has shown remarkable resilience through challenging market conditions. Tony Dong on Motley Fool thinks you should buy this stock for your RRSP account. He says that it is one of only two companies in the U.S. with a AAA credit rating, a testament to its financial stability and a rare accolade that underscores its safety as an investment. The company put out a Press Release about their fourth quarter of 2024. The company put out a Press Release about their third quarter of 2025.
Simply Wall Street on Yahoo Finance gives this stock a valuation of $198.03. Simply Wall Street has one warning of large one-off items impacting financial results.
Johnson & Johnson operates through pharmaceuticals, medical devices, and consumer products divisions. Its web site is here Johnson and Johnson.
The last stock I wrote about was about was Quebecor Inc (TSX-QBR.B, OTC-QBCRF) ... learn more. The next stock I will write about will be Finning International Inc (TSX-FTT, OTC-FINGF) ... learn more on Friday, November 7, 2025 around 5 pm. Tomorrow on my other blog I will write about Something to Buy November 2025.... .... learn more on Thursday, November 6, 2025 around 5 pm.
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