Summary
- Johnson & Johnson is a high-quality company with low but steady growth and strong margins.
- The company boasts the highest credit rating available and generates big cash surpluses, making it a very safe pick.
- The asbestos scandal has hurt the reputation of the company but is, ultimately, not a big threat to the business.
Introduction
Johnson & Johnson (JNJ) has long been considered a safe investment. It is not a speculative, high-risk, high-reward type of stock. I would rather call Johnson & Johnson a "set it and forget it" type of investment. You buy the stock and then wait for dividends and capital appreciation to accumulate over the years. This strategy only works for companies with business models that are successful long term. The dividend history of Johnson & Johnson shows that this company is particularly suitable for this type of strategy. The dividend has been increased for 58 consecutive years. Those who bought the stock 10 years ago have almost doubled their money by now.
The company continues to be an excellent pick for investors who want a stable dividend payer in their portfolios. The asbestos scandal has turned some people away, but it, ultimately, is not a threat to Johnson & Johnson. The company is a cash-generating machine that provides safety and income for shareholders. Unfortunately, the stock is not particularly cheap at the moment but nevertheless trades at a decent price.
All Charts are taken from Dividendstocks.Cash unless indicated otherwise.
The business model
Johnson & Johnson is a globally operating company that manufactures pharmaceutical products, medical devices, and consumer goods. Johnson & Johnson's history stretches far back in time. Founded in 1886, the company is now one of the most valuable companies in the world. As of March 31, 2020, Johnson & Johnson was the tenth-largest company in terms of market capitalization.
Source: jnjinnovation.com
Over the course of more than 100 years, Johnson & Johnson has developed into a successful company. To survive and be successful over such a long period of time is only possible with a good business model and good management.
The business model of Johnson & Johnson is structured in three segments: "Consumer Health Products", "Medical Devices", and "Pharmaceutical Products". The Pharmaceuticals division accounts for the largest share of sales with 51 percent. Medical Devices accounts for 32 percent of sales. Consumer Health is the smallest segment and generates 17 percent of sales.
