- $JNJ is one of the most beloved dividend growth stocks.
- I own a mid-size position of $JNJ in my personal brokerage investment account for its long-term dividends.
- How has $JNJ been doing in the past 15 years?
Out of my own curiosity, two days ago I did a detailed case study with $JNJ. I went to Johnson & Johnson Investor Relations website and checked all the information about its past daily stock price and dividend payment days.
Hypothetically I bought 31 shares of $JNJ on Nov. 17, 2005 at market price immediately when the stock market opened. That price was $63.62 per share. That cost me a total of $1972.22. I was trying to use a hypothetical lump sum total of $2000 as my principal; however, that was what I ended up using as there was no fractional share purchase function back then. For the demonstration purpose, I ignored the broker commission, which back then probably was about $20.
Then I leave the money alone, collect the dividends and re-invest back to $JNJ. The rule of reinvesting was that all dividends were immediately used to purchase $JNJ the day when the dividend was paid/received and the purchase price would always be the the market price at the stock market opening. I used the second day of dividend payment day as the day of purchase as many brokers usually have a 1 day delay to distribute the dividends.
The initial dividend yield was 2.07% (JNJ paid $0.33/share in 2005).
The total dividend collected during the 1st quarter was $10.23.
Fast forward 15 years later, what happened to my 31 shares of $JNJ stock and how much does it worth now?
Here is the results:
The initial 31 shares now have become 47.8579 shares.
The total dividend collected in the 4th quarter of 2020 will be $48.01
The total value of these shares now worths $7090.14.
The yield on cost now is 9.8%.
The entire investment achieves a CAGR of 8.9%.
This return is slightly lagging behind SP500, which has a CAGR of 9.2%, dividends included.
However, dividend claims a much larger portion in the total return of $JNJ, as compared to SPY, and 15 years later (today) the quarterly dividend received from $JNJ is much higher than SPY.
Is this a good investment? Well, it depends. If you like to chase total return, JNJ may not be a stock for you. On the other hand, if you want to have very reliably passive income for the long term to support your lifestyle, JNJ seems a wonderful stock to pick. It gives your more cash flow and also retains reasonable price appreciation.
Of course, this is just a historical study, and no guarantee that the future 15 years $JNJ will repeat its past performance. However, I have reasonable confidence that this could happen. And with the stock price lagging SP500 in the past 2-3 years, there may be a chance that in the future years JNJ could achieve better return than SPY.
Analyst's Disclosure: I am/we are long JNJ.
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