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.
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%.
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.