Tag Archives: NYSE:JNJ

Will You Buy This Dividend Aristocrat Now Or Wait?

Johnson & Johnson (NYSE:JNJ) recently reported its Q4 and full year results. In 2018, it increased sales by 6.7% to $81.6 billion. Excluding divestitures/acquisitions, sales would have increased by 5.5%

A Business Overview

J&J is a globally diversified healthcare company that operates in three segments:

  1. Consumer, which includes popular brands such as Tylenol, Motrin, Neutrogena, and Aveeno;
  2. Pharmaceutical with Zitiga, Stelara, Tremfya, etc. that were key contributors to growth; and
  3. Medical Devices
Source: Author-generated pie chart with company sales data

The Pharmaceutical segment is the largest and experienced the highest sales growth of 12.4% (compared to 1.8% for Consumer and 1.5% for Medical Devices). The segment experienced market outperformance driven by double-digit growth in 10 key products.

In 2018, about 51% of its sales were in the U.S. and 49% were international (23% in Europe, 18% in Asia-Pacific and Africa, and 7% in the western hemisphere excluding the U.S.).

J&J’s blockbuster portfolio contributed nearly 47% of sales in 2018.

Source: J&J’s Q4 earnings call slides– Slide 22

The company doesn’t stop there, though. It continues to grow its portfolio via research and development (“R&D”), acquisitions and licensing, deals and partnerships, etc. In 2018, it spent about $11 billion in R&D, which was about 13% of sales and aligned with the percentage spent in 2017.

Source: J&J’s Q4 earnings call slides – Slide 23
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Retirees: How To Protect The Principal Of Your Dividend Portfolio

There are various things retirees can do to protect the principal of their dividend portfolios. At the stock level, retirees can buy quality businesses with a minimum credit rating of BBB, a strong moat, and a long history of profitability at a margin of safety. Retirees should also ensure their portfolios are sufficiently diversified and build a cash reserve to sail smoothly through market downturns.

Investment-grade rating

Looking at a company’s credit rating is one factor of quality that can be easily checked.

Companies that have manageable levels of debt, good earnings potential, and good debt-paying records will have good credit ratings. – Investopedia

A company rated as BBB or higher by Standard & Poor’s or Moody’s is considered investment grade. The higher the rating, the higher the quality. Retirees can add a layer of safety by investing in stocks that have a credit rating of BBB+ or higher.

Johnson & Johnson (NYSE:JNJ) and Microsoft Corporation (NASDAQ:MSFT) are both awarded the strongest S&P credit rating of AAA.

Earnings or cash flow stability

Depending on the type of the company, you would want to look at its earnings or cash flow history to see how stable its profitability is and if the company tends to grow its profitability over the long run.

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What Does Pokemon GO Have To Do With Investing?

Nintendo Co., Ltd appreciated more than 100% in July after the launch of Pokemon GO. A month later the shares have already declined 27% from the peak.

Pokemon GO logo

Speculating is not investing

It’s great if you got in on the action before Pokemon GO was launched, but after the launch and the stock already went up, it’s too late to jump in.

To add to that, no one knows how long people will continue playing Pokemon GO. Actually, Pokemon GO already lost some users as the hype dies down a bit.

If investors are buying Nintendo just because of Pokemon GO, it’s purely speculation and not investing, unless they believe in the future of Nintendo as a company.

Besides, it’s not like Nintendo owns the Pokemon game. Check out Quora for the relationship between Nintendo, Niantic, and the Pokemon company and find out who benefits from the game.

In fact, I was surprised by the answer that Apple Inc. (NASDAQ:AAPL) and Alphabet Inc (NASDAQ:GOOG)(NASDAQ:GOOGL) get a share of the pie. I think both of these tech giants are better investments than Nintendo, especially Apple, which trades at about 12.9 times earnings and yields 2.1% at about US$108 per share.

Gotta catch ‘em all?

In the Pokemon world, one of Ash’s goal was to catch all the pokemon. Not for investing, though. You better not try to catch ‘em all. Read More