In yesterday's Stock Analysis on JNJ, I stated that for some time now, I have been looking for an entry point to purchase JNJ. The overall rating of two Stars has not changed since my first review on 11-21-2007. However, many of the metrics I look at have changed and here's a break-down the differences between now and then:
02-11-2008: $62.03 (Good!)
02-11-2008: 17.3 (Good!)
02-11-2008: 2.64% (Good!)
Avg. P/E Price:
02-11-2008: Favaorable (Good!)
Years to MMA:
02-11-2008: 11 (still one more than I prefer as a maximum, by 1 year)
NPV MMA Diff:
02-11-2008: $2,517 (More than 5 times the November 21st amount)
Since new dividend data was available, I used my model D4L-PreScreen.xls to update some of the above analysis. I input the following data:
Current Yield: 2.64%
Calc. Div. Growth: 11.0%
MMA Yield: 4.86%
Max Div. Growth: 20.0%
Override Div. Gro: 0.0%
2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997
1.62 1.46 1.28 1.10 0.93 0.80 0.70 0.62 0.55 0.49 0.43
The calculated NPV MMA Diff only changed slightly. I determined that it would take a dividend growth rate of 11.7% to get the Years to MMA down to 10 (the maximum I like to see). Since I use a conservative method of estimating the dividend growth rate, a 11.7% is not unrealistic given the 11-year average is 14.0%. Using the Override Div. Gro. field I entered 14.0% to see what that did to the NPV MMA Diff - it increased to $8,132. I entered 5,000 in cell C25 then pressed the button in D12 to backsolved for the growth rate needed to give me a NPV MMA Diff of $5,000. It was 12.6% which is not unreasonable.
My conclusion: Buy. Like General Electric Company (GE), JNJ is one of those boring predictable companies that finds its way into most every dividend investor's portfolio. JNJ is a well-managed, well-run company and has been that way for decades. I like owning companies like JNJ and GE because it offsets some of my more riskier investments, but I will not buy in at just any price. I purchased a small block of JNJ and will continue to watch it for opportunities to add to my position.
Full Disclosure: At the time of this writing, I proudly own shares of JNJ.
Tomorrow: What did I sell to buy JNJ and why?
Popular Posts - Last 7 days
Long considered the domain of “ widows and orphans ”, utilities have developed a somewhat stodgy reputation. Why are utilities considered g...
Linked here is a detailed quantitative analysis of Kimberly-Clark Co. (KMB). Below are some highlights from the above linked analysis: Co...
Each Sunday I highlight any notable articles that I came across over the past week. Though I may not always agree with each of the articles ...
Linked here is a detailed quantitative analysis of CVS Health Corporation (CVS). Below are some highlights from the above linked analysis: ...
Most casual income investors focus on current yield, which is important. However, if your objective as an income investor is to build a port...
Once again it is time for a goals/progress update. I am pleased to report that annualized dividend income increased in September, extending ...
Presented below are my dividend stock and ETF/CEF holdings. This is not a recommendation to buy these securities. I have classified some of...
Monday, October 31, 2011 will mark my fourth full year of writing as Dividends4Life . It is hard to believe another year has passed. Like th...
Like many that came before me, I am on a journey to construct a portfolio that will provide me... Dividends 4 Life
The difference between an income investor and a dividend growth investor is time and the understanding of how compound growth works. If you...