Friday, April 1, 2016

Recent Transfer: Johnson & Johnson

Founded in 1886 and based in New Brunswick, New Jersey, Johnson & Johnson (NYSE:JNJ) has grown into one of the largest companies in the world, employing 128,000 people across 275 operating companies. The company is a leader in the pharmaceutical, medical device and consumer products industries. The company distributes its products to the general public, retail outlets and distributors, wholesalers, hospitals and health care professionals.

JNJ is a Dividend Champion with an impressive 53-year streak of dividend increases. It pays quarterly dividends in March, June, September, and December.

I'm in the process of consolidating several portfolios so I can manage all my dividend paying stocks at DivGro. I've completed the transfer of stocks from my Scottrade portfolio and now I'm busy transferring stocks from my Roth IRA and my traditional IRA.

Last month, I transferred the first stock from my traditional IRA, 3M Company (NYSE:MMM), to DivGro. Today I'm transferring the second stock, JNJ.

I already own 30 shares of JNJ. With this transfer, I'm adding another 24 shares for a total of 54 shares. Here is a chart showing my buy prices:


The 3 buys I'm transferring today are connected with red dashed lines. The other buy, indicated with an orange icon, represents the 30 shares of JNJ already in my DivGro portfolio.

Transactions
2013-04-24Bought: 10.92235 shares of JNJ at $84.99 per share:$928.26
2013-06-11Dividend on 10.92235 shares at 66¢ per share:$7.21
2013-09-10Dividend on 10.92235 shares at 66¢ per share:$7.21
2013-12-10Dividend on 10.92235 shares at 66¢ per share:$7.21
2014-03-11Dividend on 10.92235 shares at 66¢ per share:$7.21
2014-06-10Dividend on 10.92235 shares at 70¢ per share:$7.65
2014-09-09Dividend on 10.92235 shares at 70¢ per share:$7.65
2014-10-31Bought: 9.28480 shares of JNJ at $107.70 per share:$1,000.00
2014-12-09Dividend on 20.20715 shares at 70¢ per share:$14.15
2015-02-27Bought: 3.79285 shares of JNJ at $102.84 per share:$390.06
2015-03-10Dividend on 20.20715 shares at 70¢ per share:$14.15
2015-06-09Dividend on 24 shares at 70¢ per share:$16.80
2015-09-09Dividend on 24 shares at 75¢ per share:$18.00
2015-12-08Dividend on 24 shares at 75¢ per share:$18.00
2016-03-08Dividend on 24 shares at 75¢ per share:$18.00
                                                               
 Total Capital Invested $2,318.32

Total Dividends Received:$143.22

With this transfer, DivGro's projected annual dividend income (PADI) increases by $72.00 and I'm adding $143.22 in past dividends to DivGro's total dividend income.

Ratings and Fair Value Estimates for JNJ


Following is a table containing updated ratings of JNJ from various sources:
 Morningstar Ratings (**---) Credit Rating: AAA 
 Dividend.com's DARS Rating  3.4/5 (Neutral)
 TheStreet Ratings Rating  Buy [A-]
 The Motley Fool's CAPS Rating  (****-)
 Thomson Reuters StockReport+ (8/10) Positive 
 S&P Capital IQ Stock Report Buy (****-) Quality Ranking: A+ 
 Zacks Rank and VGM Style Score 2-Buy (VGM:D)
 Tipranks Analysts Consensus Rating  Moderate Buy
  †combined Value/Growth/Momentum score

Morningstar's fair value estimate of JNJ is $102.00, whereas S&P Capital IQ calculates a fair value of $104.70. According to Tipranks, based on 7 ranked analysts offering 12-month price targets for JNJ, the average price target is $114.33. Finally, finbox.io has a fair value estimate of $106.00.

Included here is an embedded tool allowing you to adjust several parameters in the dividend discount model and see the effect on fair value, courtesy of finbox.io.


The average of these valuations is $106.76, which means that JNJ is trading just above fair value.

Why JNJ?


As mentioned, JNJ is a Dividend Champion with a steak of 53 years of dividend increases. The company is also a member of the S&P 500 Dividend Aristocrats.

Here are some additional reasons why I like JNJ:
  1. JNJ has a AAA credit rating from both S&P Capital IQ and Morningstar
  2. The company maintains a diverse revenue base with exceptional cash flow generation. Together with its developing research pipeline, these factors create a wide economic moat, according to Morningstar. 
  3. The stock is the most popular holding among bloggers in my blogroll.
  4. JNJ is maintaining a strong dividend growth rate (DGR), with a 10-year DGR of 8.8%.
  5. JNJ's fourth quarter earnings surpassed expectations and the company's 2016 guidance also looks great, despite the negative impact of currency movement.
Do you own shares of JNJ? Would you buy shares at the current stock price? Please share your ideas about JNJ in the comments section below.

9 comments :

  1. So glad you mentioned finbox.io , that site is pretty awesome!

    ReplyDelete
    Replies
    1. Agreed! I'll be using finbox.io for many of my stock analyses in the future. Thanks for visiting and take care, Captain Dividend!

      Delete
    2. Never heard of finbox.io. I will check it out.

      Thanks for the quick summary. JNJ is quite tempting.

      Delete
    3. finbox.io is fairly new. It seems to be a great resource for stock analysis and valuations.

      Delete
  2. I wouldn't make any significant purchases of JNJ right now although I might be adding a few shares in my Roth IRA. I've got a little bit of capital from a sale I did earlier this year and need to get that money invested again. On a risk adjusted basis JNJ is still looking pretty good here. Some of your returns are eaten up by the valuation but as a buy it, check reinvest and look back in 20 years JNJ is almost always a good option. The upcoming dividend increase will just be icing on the cake.

    ReplyDelete
    Replies
    1. Hi PIP -- I probably won't buy more JNJ right now either. As you point out, though, JNJ's risk/reward stats are quite favorable. Looking at F.A.S.T.graphs, JNJ perpetually seems to be trading a few points above fair value. Its probably because the company has a AAA credit rating and a solid dividend growth stock to boot. Take care and best of luck with your investments!

      Delete
  3. JNJ was one of my favorite companies even before I started investing. Incredible how many of their products are out there. Glad to finally own some!

    -The Dividend Mogul

    ReplyDelete
    Replies
    1. Isn't it! I get a kick out of seeing my sons starting to invest in companies they like -- and are customers of. I think the familiarity with a company's products is an important component of investing...

      Glad to be a fellow shareholder!

      Delete
    2. Isn't it! I get a kick out of seeing my sons starting to invest in companies they like -- and are customers of. I think the familiarity with a company's products is an important component of investing...

      Glad to be a fellow shareholder!

      Delete

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