Linked here is a PDF copy of my detailed analysis of Johnson & Johnson (JNJ). Below are some highlights from the above linked analysis:
Company Description: Johnson & Johnson engages in the manufacture and sale of various products in the health care field worldwide.
Fair Value: I consider four calculations of fair value, see page 2 of the linked PDF for a detailed description: 1.) Avg. High Yield Price, 2.) 20-Year DCF Price, 3.) Avg. P/E Price and 4.) Graham Number. JNJ is trading at a discount to 1.), 2.) and 3.) of the four valuations listed above. If I exclude the high and low valuation, and average the remaining two valuations, JNJ is trading at a 12.9% discount. JNJ gets a Star for being fairly valued.
Dividend Analytical Data: In this section I consider five factors, see page 2 of the linked PDF for a detailed description: 1.) Rolling 4-yr Div. > 15%, 2.) Dividend Growth Rate, 3.) Years of Div. Growth, 4.) 1-Yr. > 5-Yr Growth and 5.) Payout 15% of avg. JNJ only earned one Star in this section for 3.) above - it has grown dividends for 10+ years.
Dividend Income vs. MMA: Why would you assume the equity risk and invest in a dividend stock if you could earn a better return in a much less risky money market account (MMA)? This section compares the earning ability of this stock with a high yield MMA. Two items are considered in this section, see page 2 of the linked PDF for a detailed description: 1.) NPV MMA Diff. and 2.) Years to >MMA. JNJ did not earn any Stars in this section. I would have to own JNJ for 11 years before it would pay what I am currently earning in a MMA, and after 20 years the net present value of what I earned in excess of the MMA would only be $2,517 per $1,000 invested.
Other: JNJ is a well run company that has a long track record of raising dividends. It is a member of S&P Dividend Aristocrats and The Broad Dividend Achievers. JNJ sells products that are, for the most part, immune from economic cycles.
Conclusion: JNJ earned one Star in the Fair Value section, one Star in the Dividend Analytical Data section and no Stars in the Dividend Income vs. MMA section for a total of Two Stars, which rates it as 2-Star Weak. 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. Was it enough to make me buy? Check back tomorrow and I will break-down the differences between now and then and reveal whether I bought or walked.
Disclaimer: As always this is only my opinion and you should not rely on it. Before buying or selling any stock you should do your own research and reach your own conclusion. See my Disclaimer for more information.
Full Disclosure: At the time of this writing, I may have owned shares of JNJ.
What are your thoughts on JNJ?
Recent Stock Analyses:
Popular Posts - Last 7 days
Presented below are my dividend stock and ETF/CEF holdings. This is not a recommendation to buy these securities. I have classified some of...
For many investors, there is no clear conviction as to how they should invest. Today's investments are guided by what was read or heard ...
Each Sunday I highlight any notable articles that I came across over the past week, along with any Carnivals I participated in. For those re...
To succeed as a dividend growth investor you must identify and purchase stocks with sustainable dividend growth. Inertia is powerful force....
Linked here is a detailed quantitative analysis of Medtronic Inc. (MDT). Below are some highlights from the above linked analysis: Compan...
Linked here is a detailed quantitative analysis of Raytheon Company (RTN). Below are some highlights from the above linked analysis: Com...
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...
Yield does not come without a price, usually in the form of added risk and/or complexity. Ultimately, dividend growth investors realize that...
If your goal is to accumulate wealth for a comfortable retirement , then there is no risk-free path. Throughout time every angle has been tr...
Like many that came before me, I am on a journey to construct a portfolio that will provide me... Dividends 4 Life