This morning I'd like to review a potential investment into JNJ - Johnson & Johnson. With that being said, let's start with a quick review of what we're already into in the Dividend Monster Portfolio.
Current Portfolio
Industrials:
GE - General Electric
Telecommunications:
T - AT&T
Consumer Staples:
WMT - Walmart
Consumer Discretionary:
GPS - Gap Inc.
YUM - Yum! Brands Inc.
Why JNJ?
JNJ is in a separate sector from what I previously own in the DM portfolio but that's all the more reason to be keeping an eye on it. With the youth of the portfolio, it has lots of room to grow outwards into other sectors to diversify it and attempt to ensure its future profitability and dividend growth if one of the sectors decides to tank.
Company Breakdown
Johnson & Johnson is one of the largest holding companies in the USA. It's chief products are in the health care field as they are consistently researching and developing and therefore selling a range of medical products. JNJ's most recognizable brand appears to be the baby lotion, shampoo, and washes that believably most of us grew up with. That gives it a ton of brand recognition. This is only further extended by other products that they manufacture and distribute such as Tylenol, Listerine, and Band-Aid. The company is broken into three main parts: Pharmaceutical, Medical Devices, and Consumer products.
History
JNJ has an EPS of 5.32% annual growth over the past five years and a revenue of 3.73%. In addition to this, they maintain an average growth per year of 7.42% for their dividend payouts. The dividend has been on the rise since 1963 which equals to 53 years of dividend growth with only a 48.5% payout ratio which gives them lots of room to grow their dividend further and ensure payouts. Although their dividend yield is smaller than the base that we are looking to fuel our dividend rocket ship with, it still boasts a fair 3.02% dividend payout that is paid quarterly.
Price
As of 1/26/2016, JNJ is trading at a price of $99.33/share. Its 52 week range is $81.79-105.49, its P/E is 18.47, and it has announced its ex-dividend date of 2/19/2016. If based solely on the idea of market timing, we would want to wait to add this to the portfolio to see if we could get the price to be a bit lower before jumping into the waters with the company. However, the P/E would suggest that the price is still within a reasonable range (10-20) to be comfortable with the purchase and the upcoming dividend payment could also help balance out the cost.
Conclusion
Johnson & Johnson appears to be a very strong company, well worthy of being added to the portfolio. The company has strong financials, a steadily raising price over the many years it has been around, and the P/E would suggest that it is not too far over valued to place money on it. With that being said, I would like the price to drop at least a few more dollars before I would be wanting to place my cash in their basket.
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