Thursday, April 29, 2010

J&J dividend rises & shares should be bought

Ho hum...Johnson & Johnson (JNJ) has increased it's dividend for 2010 by 10.2%. The stock has essentially gone nowhere over the past 8 years - since 2002. However:

Earnings per share have doubled over this period.

Dividends per share have tripled over this period.

J&J used to trade at a P/E multiple of 26x back in 2002 and now trades close to 13x. Net profit margins are actually higher now than they were in 2002, and return on equity has been fairly flat in the mid to high twenties. The company's debt position has grown slightly since 2002, however it sits at a very manageable level currently.

Pharmaceuticals are a tricky business as drugs come off patent and new drugs are hard to come by but J&J is only about 40% pharma. Consumer healthcare and medical devices provide more stable earnings to bolster the company year after year. The stock looks attractive right now at historic low P/Es.

1 comment:

Think Dividends said...

JNJ is great value today... I also like the fact that half their revenue is from overseas...