J&J Stays The Course On Profit Growth Track, Income
In the midst of a rip-roaring market, many investors tend to seek out fast growth over slow and steady income stocks.
But there is an argument to be made for companies that provide stable earnings and reasonable sales growth, as well as a dividend payout. The market's recent volatility could boost the appeal of sectors that are defensive in nature, such as certain medical plays.
Johnson & Johnson ( JNJ ) is a classic income stock. The New Brunswick, N.J.-based health care giant makes everything from household-name products such as Band-Aids, Splenda and Tylenol to medical devices and prescription drugs.
With such a wide range of products, it's recently been looking to slim down its portfolio by selling off some slower-growing units. Earlier this month, Johnson & Johnson said it received a $4.5 billion binding offer from the Carlyle Group for its Ortho-Clinical Diagnostics business.
J&J currently pays 66 cents a share on a quarterly basis, or $2.64 annually. That works out to a dividend yield of about 2.9% vs. the S&P 500's 2%.
It has delivered dividends to shareholders for more than 50 years, and has grown adjusted earnings for 29 years in a row. Analysts expect the company to lift profit 6% this year and 8% the next. Its five-year earnings growth rate is 4%, and its Earnings Stability Factor is 1, on a scale of 0 (most stable) to 99 (least stable).
J&J makes the S&P 500 Dividend Aristocrats, which tracks companies that have increased their dividends each year for the past 25 consecutive years.
The stock rose 31% last year, just ahead of the S&P 500's 30% gain. It's corrected along with the market this year, and sits nearly 6% below its 52-week high. It sliced through its 10-week moving average last week and is nearing its 40-week line, a level where it typically finds support.