Johnson & Johnson (JNJ) continues to trade at a historical high yield approaching 4%. A recent dividend boost from $0.57 a quarter to $0.61-- a 7% increase, was the 50th consecutive year of increased dividend payments paid by Johnson & Johnson. This report is based on the historical value of the shares of this company.
It is the preference of many dividend investors, and growth investors as well, to focus on those companies that rarely disappoint the investing community. Johnson & Johnson is such a company which has a consistent history of increasing earnings, as presented in the EPS chart found in this report. The chart immediately below graphs the historical PE and yield from 1980 to present. Only the period during the bear market in the early 1980s have the shares traded at this high of a yield level. Additionally, the PE is also at historical low levels signaling rare value.
The enclosed charts are from my own database using Excel for the graph.
There are various ways that a company may become a value in the stock market. One manner is for earnings per share to rise faster than the share price, which eventually produces value. Secondly, the shares can decline in value while earnings continue to rise. Thirdly-- which is currently the case for Johnson & Johnson-- is for the shares to remain locked in a trading range, as earnings and dividends continue to rise. The chart below graphs the price and earnings per share of JNJ for the past 30 years. During the past 4-5 years, the shares have failed to trade over the $70 level, however, the earnings and dividend payments have continued to grow, creating rare value. The last plot in the earnings line shown below is estimated earnings per share for the year ending 2012.
(click to enlarge)
Although the primary focus of this article is directed at the current value of JNJ shares, investors should consider the future growth of the earnings and dividend. The estimated growth rate in earnings per share for the next five is 9.59%, which should allow for future increases in dividend payments. Based on previous chart support, the shares can be bought at the 63 level. Should the shares drop to the 59-60 area, I would be especially aggressive due to additional secondary chart support.
Disclosure: I am long JNJ.