Summary
- JNJ is a Dow Jones Industrial Average component that makes consumer packaged goods, medical devices, and pharmaceuticals.
- JNJ's consumer brands and health care assets are mostly more valuable in a post COVID-19 world, and especially on a relative basis compared to the broader equity landscape.
- JNJ equity yields about 2.7% and the dividend is not likely to be cut soon. The company is not merely an aristocrat, but also a dividend king.
- JNJ is one of the largest components in high quality and high yield ETFs, both of which are likely to receive increasing allocations.
Johnson & Johnson (JNJ) is approaching all-time highs and I believe there is a strong probability that the company's shares will continue to appreciate in the near term. JNJ has many characteristics that deserve a premium. Most of the company's well known consumer brands performed well though the pandemic (at least so far), and the health care assets are of growing importance too. Nonetheless, investors are likely to especially price JNJ's above average dividend yield.
Johnson & Johnson's health care assets are valuable
Johnson & Johnson recently reported its Q2 earnings, and though the company's sales were down about 10% percent for the quarter, that is pretty good. This was an unbelievably difficult quarter. The majority of JNJ's sales come from pharmaceuticals and medical devices, where all sorts of elective surgeries and non-critical medical services were postponed.
(Source: JNJ earnings presentation)
Johnson & Johnson actually increased the company's global pharmaceuticals sales by 2.1% in the quarter. Pharma sales were up to $10.8 billion. Johnson & Johnson's Pharma division is also working on a Covid-19 vaccine, which is likely to be a topic of media, investor and analyst discussion in the coming months, but the company's portfolio and pipeline are already significant.
(Source: Johnson & Johnson Q2 earnings presentation)
Pharmaceutical assets are generally more highly valued now compared to before the Covid-19 pandemic began. This appreciation is due to many factors, including the importance being placed on probable future revenue and income, as well as the likely increasing importance being placed on health care and wellness. The fact that this portfolio of drugs was able to grow through the quarter and appears capable of continuing to grow in the coming years is also a desirable characteristic that investors are likely to want.
