Johnson & Johnson (JNJ) engages in the research and development, manufacture, and sale of various products in the health care field worldwide. The company operates in three segments viz., (1) Consumer; (2) Pharmaceutical; and (3) Medical Devices and Diagnostics. The company was founded in 1886 and is based in New Brunswick, New Jersey.
JNJ is a part of the dividend aristocrats, S&P500 index, and DJIA index. It has been raising its dividend for last 48 years. The latest increase in dividend was 9.3% in May 2010. My objective here is to analyze JNJ to determine fair price range for buying and adding to existing positions.
Trend Analysis
Here I am looking at trends for past 10 years of corporation’s revenue and profitability. These parameters should show consistently growth trends. The trend charts are shown in image below. continue reading rest of the article….
As dividend investors, while it is important to focus on dividends, it is also equally important to monitor the risk of capital erosion over a period of time. Dividend growth and intermediate sustainability is good, but it is less likely to be a substitute for significant loss of capital. Pfizer and GE are examples of capital erosion. These two companies were not only able to sustain their dividends but kept with their growth in last decade. However, the value of individual’s holding kept eroding over the last decade or so. For example:
It is close of five year now that I have been a long term buy and hold, and dividend growth focused investor. When I meet friends, acquaintances, or colleagues, on many occasions the discussion starts from what’s market doing today and steers towards trading/investing is nothing but a poker game. I get a sense that many of these folks think that buying (and selling) stocks is just a gamble of some kind. Irrespective of this, I believe both, trading and investing, have their own set of pros and cons depending upon what context an individual is looking at it. In the end, both trading and investing is done to make money. Some use approach of capital appreciation, some use dividend income, some do trades to generate income. The key is to have a plan and execute it with consistent results.
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Good Performers in My Dividend Portfolio
It has been close to three years since I started dividend focused investing. If I look at this from a 30year+ investing cycle for individuals, then these three years may look like nothing. However, the continued anxiety and slide in ones portfolio value will turn our hair gray. I am learning that there will be winners and losers in our investment portfolios. All we have to do is minimize the losers.
Sysco Corporation (SYY): SYY was one of the most non-glamorous stocks when I had initiated my position. My current dividend yield on cost is 5.35%. As of March 2009, my total return has been 13.1% including dividends.
Johnson & Johnson (JNJ): I had waited for close to one year to initiate a starter position in this company. It was worth a wait, and as the saying goes, every company will come down at some point in time. Its price has again come down and I am tempted to add some more, even though it has reached by allocation level. My current dividend yield-on-cost is 3.4%. As of March 2009, my total return has been 6% including dividends.
Consolidated Edison (ED): My objective was to just get a utility stock in my portfolio, and hence this was a no brainer purchase. I bought it during the market boom when slow growers like utility stocks were out of favor. I had read a lot about utility stock being less volatile and slow grower, well this was a real example for me. My current dividend yield-on-cost is 6.9%. As of March 2009, my total return has been 12.9% including dividends. continue reading rest of the article….