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A Curious Case Study Of $JNJ

Dec. 08, 2020 2:07 PM ETJohnson & Johnson (JNJ)1 Comment
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  • $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.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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