Johnson & Johnson (JNJ) was founded in 1886, and today, it is one of the world's large healthcare companies. The firm is known for its consumer products, like Aveeno, Listerine, Tylenol, Motrin, Zyrtec, Benadryl, Pepcid, Stayfree, etc. But it is also a significant player in R&D Pharmaceuticals and Medical Devices. The Pharmaceutical segment generates about 49% of total revenue, and the MedTech segment around 34%. However, the slower-growing Consumer Products segment is slated for separation in the next 18 to 24 months. It will be called Kenavue (KVUE).
Johnson & Johnson has 28 brands/pharmaceutical platforms that generate more than $1 billion in annual revenues. Also, approximately 70% of its sales are from products in the No. 1 or 2 market share position.
Total revenue was $94,943 million in the fiscal year 2022 and the last twelve months.
According to Stock Rover*, the stock price has fallen approximately (-12.2%) in 2023 and (-4.7%) in the trailing year after adjusting for dividends reinvested. The stock price is near the 52-week low. For perspective, the S&P 500 Index has been down (-6.3%) in the past twelve months.
Johnson & Johnson (JNJ) was a stock we covered early in 2023. The stock price has trended down since then for several reasons. First, as seen in the Stock Market This Week, investors are seemingly focusing on tech stocks. The Nasdaq and Nasdaq-100 are performing well. JNJ is not a tech stock.
Next, JNJ's future organization could be clearer because of the impending separation. Finally, litigation risk from talc is pressuring JNJ's stock price. Investors dislike uncertainty.
The declining stock price has pushed the dividend yield to nearly 3%, a value rarely seen for Johnson & Johnson. Moreover, it is below the 5-year average of 2.65% and is supported by a conservative payout ratio of ~44%. Johnson & Johnson is known for its long dividend growth history. It is one of the few Dividend Kings with 60+ years of increases. The growth rate is consistent at ~6% annually.
Source: Portfolio Insight*
Johnson & Johnson is undervalued based on the price-to-earnings (P/E) ratio. However, the 3% dividend yield, long dividend growth history, and the 'AAA' balance sheet are attractive. JNJ is a long-term buy-and-hold stock.
Source: Portfolio Insight*
Disclosure: None
Disclaimer: The author is not a licensed or registered investment adviser or broker/dealer. He is not providing you with individual investment advice. Please consult with a licensed investment professional before you invest your money.