Tuesday, June 17, 2014

Dividend Growth Investment Johnson&Johnson



Once again, here I am, capital in hand ready to be deployed in order to increase my dividend income stream. I have to say, this is one of the non-financial advantages of this strategy, the happiness and thrill I get when something happens: deploying capital, receiving a dividend, seeing a dividend increase, seeing the price of a company I want to own go down, seeing the price of a company I own go up. Every single one of these small steps really feels fulfilling, knowing that each step is moving me closer and closer towards financial independence.

As anyone that follows the market knows, there are many claims that the prices are too high at the moment, with some people going as far as saying we are due for a strong correction. Honestly, due to this approach of acquiring good quality companies at good prices, I literally don't care about what's going to happen to the market. If a strong correction comes, I'll be happy, as I can make my acquisitions for a lower price. If it doesn't, I'll keep looking for companies that I consider reasonably valued and will continue buying them. 

While I basically ignore the general market and noise, I got to say that the current overall prices make it much harder to find good value at reasonable prices. There are several companies that interest me a lot, but at this point are sporting a price that I deem to high. So, of all the companies in my interest list I decided to go for Johnson & Johnson (JNJ). I consider the current price to be fair for a company of this quality and while I don't believe it presents a discount, it is still a great deal. As Warren Buffet said once: "It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price".

Regarding Johnson & Johnson (JNJ), I believe it doesn't need any introductions. It's one of the oldest Healthcare companies and probably the most well known due to their over-the-counter consumer goods division. 

This company is one of the most impressive of the already impressive dividend aristocrats constituents. It has increased it's dividend for 52-consecutive years, having a recent average increase of around 7%. They sport very healthy debt, great Return-on-equity and consistently grow earnings at a compound annual rate of around 6%.

Apart from the great balance sheet, what interests me the most in this company is that it is perfectly diversified both geographically and division-wise. Their geographic footprint also allows them to play aggressively in emerging markets where most of the growth is expected to come from. Furthermore, they operate in a sector forecast to grow immensely in the years to come due to an increase in aging population and technology advancement.

All in all, considering the current dividend yield, usual growth, track record, sector and performance, this is probably my favorite company and one that I feel confortable buying indefinitely.

Stock Price: 101.5$
Dividend Yield: 2.75%
Dividend Raise Streak: 52 Years
Typical Yearly Dividend Growth (5yr): 7% 

What about you? Where are you finding value these days?

13 comments:

  1. DV,

    Nice acquisition. For some reason I have not yet added JNJ to my portfolio. This is an important cornerstone and I probably need to just hold my nose at these high prices and buy anyway. Also you are 100% correct about buying during all market conditions. Many people thought the market was overvalued in 2012 and 2013 and here we are today at much higher levels.

    MDP

    ReplyDelete
    Replies
    1. Hi MDP,

      I was on the same boat as you, I considered JNJ a core holding of my portfolio but took a long time to pick it up. I seriously regret no picking it up when the P/E was at 17/18 just a few months ago. While I consider it is fully valued, I consider it one of the few stocks worth their price at the moment.

      I also think that as long as you see fairly priced value you should go for it, otherwise you end up in a place of market timing. I would be okay not buying if there was absolutely nothing at fair value, but I assume at that point, the market won't hold for very long.

      Best Regards and Good Buys,
      DividendVenture

      Delete
  2. JNJ has been a long time holding of mine and continues to be. It is a great dividend payer as you already know ad in today's market seems fairly priced. Many other consumer sector stocks have much higher PE's and JNJ seems reasonable even at current levels. Good pick up. I like reading about good solid dividend payers rather than high yielding REITs or MLPs. Thanks for sharing.

    ReplyDelete
    Replies
    1. Hi DivHut,

      Spot on! Most of the consumer sector stocks have P/E's north of 20, while JNJ is mangificent blend of consumer and healthcare.

      I'm also with you on solid dividend players, I was considering buying HCP or VTR which are the most consistent healthcare REITS out there and I was still reluctant to pull the trigger. They do look good, but I have to admit I don't fully understand healthcare real-estate industry and considering the financial fragility of REITs, I have trouble assessing their true value, but they do look well-priced based on historical averages.

      Best Wishes,
      DividendVenture

      Delete
  3. DV,

    One of my favorite companies, and currently my largest investment (oscillates with PM).

    I don't see much I don't like with JNJ, which is hard to do for many companies out there. There's usually a list of drawbacks for any given stock, but I find myself scratching my head when it comes time to make a list for JNJ. It's about as solid a stock as one can possibly buy.

    Best wishes!

    ReplyDelete
    Replies
    1. Hi DM,

      Thanks for stopping by!

      That's precisely my position right now, I like everything, I can't seem to find a drawback. Although, I have to say that their management doesn't inspire me the same confidence as the management from other companies I own. I say this based on the way that they communicate combined with recent recalls. Still, an amazing company that has been growing yearly despite the bumpy road.

      Cheers,
      DividendVenture

      Delete
  4. I love to own JNJ, but for some reason, I cannot own now. I remember I used their products when I was young, my brothers and sister used their products, now their children are using, and in the future our grandchildren and grand-grandchildren will be using.

    Best Regards,

    ReplyDelete
    Replies
    1. Hi Finance Journey,

      Completely agree and that's one of the things I love about them, the fact that they are a diversified healthcare giant that have a consumer good-side of production.

      Best Regards,
      DividendVenture

      Delete
  5. Great core holding for every investor. JnJ is a rock. Tougher to find a better quality company really. Its one of those positions you just keep adding to. Great Pick!

    Good Day and Grind On!

    ReplyDelete
    Replies
    1. Hi Asset-Grinder,

      Definately! In fact, as the market keeps inching up and finding value keeps getting harder by the day, I intend to add to this position every time and I can't find value anywhere else. Like you said, it's a core position for any investor.

      Best Regards!
      DividendVenture

      Delete
  6. I already own J&J and would love to add to my position in the future. I really enjoy reading what others think about the stocks i own, often they make great points that I may have missed. Thanks for sharing your thoughts on one of my favorite holdings J&J. Best of luck.

    ReplyDelete
    Replies
    1. Hi Captain Dividend,

      I looks like J&J is a favorite holding for most of the investors. I'm glad I got it at that price considering it kept climbing up. I would like a pull back in order to be able to add aggressively to this position!

      Best Wishes!
      DividendVenture

      Delete
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