Dividend stock analysis: Johnson & Johnson (JNJ)

By: ispeculatornew
Date posted: 02.03.2011 (5:00 am) | Write a Comment  (0 Comments)

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On Tuesday, we posted the top 100 dividend stocks and one of the more interesting things that we noticed was that 4 of the top 5 stocks were in the same industry: telephone! We will take a deeper look at those companies in tomorrow’s newsletter (sign up now if you have not done so yet, it is free) but in the meantime we decided to take a deeper look at a stock that certainly looks like a great part of a passive income portfolio on the surface.

So just how does Johnson & Johnson (JNJ) rank as a dividend stock?

Of course, we will be ranking Johnson & Johnson (JNJ) based off of the top 20 things that we consider when evaluating dividend stocks.

Dividend Metrics

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Johnson & Johnson is certainly an interesting pick and not only is the current dividend yield very solid at over 3% but the 1 year and 5 year dividend growth are both near 10%. I would certainly give a great grade to JNJ.

Company Metrics

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While the company metrics are not as impressive, they do remain rock solid. For such a big company, having sales growth of about 5% is very solid, especially in this difficult economy. That being said, it is unlikely that JNJ will be able to increase its dividend by 9-10% every year if sales are only increasing by half of that. That being said, the payout ratio remains fairly low and JNJ will probably be able to keep up the high dividend growth for many more years.

Stock Metrics

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In technical terms, there is no doubt that the stock does not look very attractive and it’s trend analysis score is as bad as it gets; -100.

Industry Metrics & Fit within your portfolio

Johnson & Johnson is a very diversified company and it’s difficult to imagine a scenario where JNJ would have major trouble. Its growth could slow down but chances are very good that the medical products business will remain very steady. In terms of fit within your portfolio, JNJ would be a great fit in most cases, especially if you have a few growth or cyclical industry stocks.

Overall Analysis

If I compare Johnson & Johnson (JNJ) to other dividend stocks such as Verizon (VZ), Coca-Cola (KO) & Pepsi (PEP), McDonald’s (MCD) or others, I would consider the stock to be one of the attractive ones. I would personally grade it as one of the top dividend stocks.

Do you agree?

Disclosure: No positions on Johnson & Johnson (JNJ)

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