1 More Reason To Buy Johnson & Johnson

Two months ago, I showed you 5 Reasons To Buy Johnson & Johnson to help Depression Proof Your Portfolio.

Today, I’m going to show you 1 More Reason To Buy Johnson & Johnson after it released its most up to date quarterly earnings.

You can use the link above to read the prior Johnson & Johnson article…  If not, I’ve included a brief recap below.

5 Reasons To Buy Johnson & Johnson

Johnson & Johnson (JNJ) is the world’s largest healthcare firm.  And it has 3 major divisions…

  • Pharmaceuticals
  • Medical Devices and Diagnostics
  • Consumer Health

You’re probably most familiar with its consumer health brands some of which are seen in the following picture.

In other words, JNJ helps keep the world healthy… And has for decades.

Johnson & Johnson’s 2.7% Dividend

Over the last decade JNJ’s paid out a total of $28.82 per share in dividends.

At today’s share count of 2.671 billion shares that’s equal to $76.98 billion paid out to shareholders in the last decade.

Plus, in the last decade it grew its dividend 82.9% from $2.11 per share in 2010 to $3.86 per share now.  This is an annual dividend growth rate on average of 8.3% per year.

And you should continue to count on these dividends for your retirement as well because Johnson & Johnson is one of only 29 “Dividend Kings” in the world.

A Dividend King is a stock that fits the following criteria…

  • It’s a member of the S&P 500.
  • The company has paid AND increased its dividend for 50+ years.

JNJ Earns Huge Profits

Over the last decade it earned an average operating income margin of 25.8% per year.

I look for anything above 10% on a consistent basis so JNJ surpasses this number.

Why 10%?

Because after evaluating thousands of companies over the last 13+ years of my career I estimate fewer than 5% of all companies in the world produce consistent operation profit margins above 10% over long periods of time.

This makes JNJ a great operating business.

But it also means the company earns enough money from its operations to continue investing in the business for growth… Without having to issue debt or equity.

Another way to show this is with its free cash flow to sales ratio (FCF/Sales). Over the last decade its 21.3% per year on average.

JNJ surpasses my thresholds on both important metrics and that makes it an incredibly safe investment.

The Coronavirus Won’t Harm JNJ

Because of the mass unemployment caused economic issues we’re now dealing with people may stop paying these things if they need to.

But people won’t stop using Johnson & Johnson products to improve their health.

This was illustrated when JNJ released its most recent quarterly report on July 16th, 2020.

Revenue only fell 10.8% from the 2019 2nd quarter to the 2nd quarter of 2020.

And most of this was due to a fall in its medical devices segment when people were forced to put off elective surgeries due to the coronavirus.

With restrictions on elective surgeries in various cities and states lifting around the US, sales should pick back up in this segment.

And even with this, in the last 12 months JNJ has still produced $17.4 billion in free cash flow.

JNJ’s Low Debt

As of this writing its debt to equity ratio is 0.4

I look to buy companies that have a debt to equity below 1.

Why?

Because the lower debt levels the company has, the lower chance it has of going bankrupt.  And this makes it a safer investment.

JNJ Is Cheap

This is reason#5…

With the markets at or near all-time highs you’d expect a fantastic stock like JNJ to be selling at an enormous valuation.

But it’s not.

As of this writing its P/E is 26.2.

Its P/CF is 19.2.

And its forward P/E is 18.9.

On all three metrics I look to buy investments below 20 to consider them undervalued.

This means, at its current valuations that JNJ is slightly undervalued to about fairly valued.

Conclusion

If you’re looking for a solid, safe, stable, dividend paying, cheap, and enormously profitable investment to Depression Proof Your Portfolio – consider investing in Dividend King Johnson & Johnson.

***

This thesis to buy Johnson & Johnson to Depression Proof Your Portfolio continued to play out after it released its most up to date quarterly financials on October 13th, 2020.

  • Sales increased 1.7% in the year to year quarterly period to $21.1 billion.
  • Earnings per share rose 101.5% in the year to year quarterly period to $1.33 per share.
  • And JNJ increased its full year revenue guidance by $1 billion “driven by the strength of the recovery and strong underlying business fundamentals.”

It achieved this during the worst economy we’ve seen in almost 100 years.

This illustrates the power of its business… And why I recommended you buy it two months ago to Depression Proof Your Portfolio.

And its also why I’m once again recommending you buy its stock again today after its latest quarterly earnings release.

Click the links below to see other stocks we recommend to Depression Proof Your Portfolio and earn safe investment returns.

Disclosure – Jason Rivera is a 13+ year veteran value investor who now spends much of his time helping other investors earn higher than average investment returns safely. He does not have any holdings in any securities mentioned above and the article expresses his own opinions. He has no business relationship with any company mentioned above.

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