Johnson & Johnson: Offering Strong Yield and Steady Growth

The dash for trash in the U.S stock market may continue, but there is no replacing the safety of blue chip dividends. Johnson & Johnson (JNJ) sports a 3.4% dividend yield based on its current share price-higher than the yield on 10-year Treasuries. The company generated steady, 10% earnings growth from 2005 to 2008 before hitting a tough year in 2009.

J&J is underleveraged with a debt to equity ratio less than 20% and continues to buy back its stock over the long term (in excess of $7.4-billion since 2007). It has also maintained cost controls that has allowed for steady gains in operating margins in the first quarter of 2009.

The weak current environment has led to a 7.2% drop in first quarter 2009 revenues, but it is worth noting that the fall in revenues was largely a result of strength in the U.S. dollar (46% of sales are outside the U.S.) and bodes well for long term revenues and earnings assuming dollar weakness.

J&J's pharmaceutical business is expected to see a 4% revenue decline in 2009 as two of its three largest and most profitable drugs go off patent according to First Global Research but will see renewed growth in 2010 based on a "relatively strong pipeline."

The company looks to earn roughly $4.50 per share for calendar year 2009 across its entire business, including its medical devices and diagnostics and consumer products divisions giving it a 12 times earnings multiple in 2009.

Comments

[Bobbejaan]

JNJ is one of the easiest shares to invest in. Do it and leave it alone for the long term. Boring and simple, no problem.

2009 May 14 01:09 AM

[ValueInvestor88]

I had been buying a lot of JNJ stock recently as the price is such a bargain which you will never see it again after the crisis. Great company which is built to last.

2009 May 17 08:02 AM