Summary
- As of April 5, Johnson & Johnson shares closed at $136.18. The share price has shown fairly steady growth, from ~$70 in 2012 to the current level.
- The steady share price growth and regular increasing dividend payments have provided solid, stable returns for investors over the past 6 years.
- This is the only way an investor can realize a return from an investment in shares, through receipt of dividends, and/or gains on sales.
- Analysts' Corner proprietary 1View?Scenarios dashboards are used to assess whether Johnson & Johnson investors can reasonably expect to enjoy returns in the future similar to those available over the past six years.
- Historical and projected rates of return for Johnson & Johnson are compared to similar data for Pfizer - with Pfizer, perhaps surprisingly, coming out a clear winner.
- This idea was discussed in more depth with members of my private investing community, Analysts Cnr | H2 SuperGrid. Start your free trial today »
Johnson & Johnson: Investment Thesis
(Sutures: The Iconic Johnson & Johnson Invention That Revolutionized Medicine; Source: Johnson & Johnson)
Johnson & Johnson (JNJ) has raised its dividend each year for the last 56 years, making it a Dividend King. Dividend CAGR for 1, 3, 5 and 10 years are all above 6% (see here). Its drug development pipeline has ensured a sustainable business in the past, and should continue to provide a sustainable business into the foreseeable future. JNJ's adjusted non-GAAP earnings have grown by an average 7.6% over the past 6 years. The only way an investor can realize a return from an investment in shares is through receipt of dividends and gains on sales of shares. I repeat - the only way.
JNJ share price has grown fairly steadily over the last 6 years, and this is expected to continue on the back of growing earnings. The company has also been growing dividends paid to shareholders, which is the other source of returns for share investors. Shareholders have enjoyed total returns ranging from ~5% to 12% over the past 6 years, as shown in Table 1 below. But that is the past. Analysts' Corner proprietary 1View?Scenarios™ dashboards are used to assess whether investors in JNJ can reasonably expect to enjoy returns in the future similar to those available over the last six years. Using analysts estimates available through SA Essential and Nasdaq (Zacks research) and company guidance, we find there are good possibilities of total returns ranging from 7% to 10% per year for investors willing to invest and hold through 2021 to 2022 and beyond.
