February Stock Purchase #1

This is the first of my 4 weekly stock purchases in February via Sharebuilder’s automatic purchase plan and this week I added to my existing position in Johnson & Johnson.

Johnson & Johnson

JNJ is a $283B diversified healthcare company which operates in three segments: Pharmaceutical, Medical Devices & Diagnostics and Consumer. It was formed in New Jersey by three Johnson brothers back in 1886.

JNJ has increased its dividend every year for the last 52 years, currently giving $0.70 a share for a yield of 2.8%. It’s likewise a very stable and consistent dividend growth stock, with dividend increases usually declared in April each year. Payout ratio is currently on a downward trend over the last 3 years and is at 45%, down from its all-time high of 64.6% in 2011. Annualized dividend growth over the last 5 years is 7.4%.

Its P/E of 16.8 is lower than the S&P’s average of 17.9. This value is lower than prior years 2011 through 2013 where JNJ’s P/E was higher than the S&P average. Analysts project an 5-year EPS growth of 5.8%.

Free Cash Flow has been positive for each of the last ten years with a low of $8.9B in FY2004 and a high of $14.2B in FY2009. TTM Free Cash Flow is $14.6B, higher than 2013’s $13.8B.

My JNJ shares currently contribute a total of 3.6% of my forward dividend income, well within my 5% limit.

Recent News

JNJ’s 2014 annual results were published last month. While 4th quarter sales were down 0.6% (organic growth of 3.9% but currency rates had a 4.5% negative impact), the overall year represented an increase of 4.2% of sales over 2013. Earnings guidance from the company for full-year 2015 is $6.12 to $6.27 per share, a projected increase of 3.7%.

Rationale

I chose JNJ to increase my allocation to the Healthcare sector. While it’s not an especially cheap stock, I think the price is reasonable especially considering the diversity and strength of JNJ.

February Stock Purchase

So my purchase this week was

2.9574 shares of JNJ @ $101.44 ($300)

With a yield of 2.8%, this purchase adds $8.4 to my projected annual dividend income.

 

Quote of the day

I think one of the major results of the psychology of decision making is that people’s attitudes and feelings about losses and gains are really not symmetric. So we really feel more pain when we lose $10,000 than we feel pleasure when we get $10,000.

0 thoughts on “February Stock Purchase #1”

  1. Nice buy DL! I was going to snag some just before close on Friday but got tied up in a meeting at work. I’ll be sure to get in Monday morning if possible. I’d love to start a position in this solid blue-chip company and build some additional diversification in the healthcare sector.

    1. Hi W2R,

      Great! I’m looking forward to seeing you as a fellow shareholder!
      It’s always an added bonus when you use products from the companies you own and with JNJ, there’s a lot to choose from.

      Best wishes,
      -DL

    1. Hi DivGuy,

      I’m definitely with you on JNJ and I added some a little more in this week’s purchase too along with a couple other stocks. More about that later.

      Thanks for your support!
      Best wishes,
      -DL

  2. Nice buy of JNJ. I noticed it’s back below $100 which seems to be a decent entry point currently. Not a back up the truck price but a solid entry price. I wouldn’t mind adding some more to my position if the price drifts lower. Especially if it approaches a 3% yield before the next dividend increase.

    1. Hi JC,

      I’m certainly considering to add more JNJ at these prices. It’s definitely worth keeping an eye on JNJ though and a 3% yield would be great – they declare their dividend increase in April, so not long to go now.

      Thanks for stopping by and best wishes you to and your family – especially Baby Luke! He’s making progress and getting stronger every day!

      -DL

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