As an investor, most of us want the triple bagger. We want a sizable return on our money and we take calculated risks to get there. But there is something to be learned from the tortoise and the hare fable. As great as a quick return is, sometimes, we need to invest in a slow and steady performer. In this case, that stock is Johnson & Johnson (NYSE:JNJ).
It’s not a sexy pick and it isn’t going to double your money by the end of the year. But if you want solid growth over the long term, then this stock should be in your portfolio.
This article appeared first on ModestMoney.com.
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Johnson & Johnson Background
Johnson & Johnson (NYSE:JNJ) was started back in 1886 by brothers Robert Wood Johnson, James Wood Johnson and Edward Mead Johnson when they created ready-to-use surgical dressings. Since then, Johnson and Johnson has expanded into various niches in the healthcare industry. Currently, they operate brands in each of the following segments:
Consumer Healthcare: offering baby care products, oral care products, beauty products and over the counter medicines, among others.
Medical Devices: offering products in areas such as disposable contact lenses, diabetes care products, general surgery products, sterilization and disinfection products, orthopedic products, and more.
Pharmaceuticals: offering products in the areas of infectious diseases and vaccines, oncology, immunology, neuroscience, and metabolic and cardiovascular diseases.
The J&J brand is so large, it encompasses many household name brands that many consumers are unaware of as being owned by Johnson and Johnson. Here is a small preview of some of these name brands:
– Tylenol
– Listerine
– Neutrogena
– Aveeno
– Benadryl
– Zyrtec
– Band-Aid
– Neosporin
– Acuvue
The Economics of Johnson & Johnson
For fiscal year 2016, J&J saw net earnings increase by 7.6% and adjusted diluted earnings per share grew by 8.5%. Breaking things down by segment, J&J saw an increase of sales by 6.5% in fiscal year 2016 in their pharmaceutical division, a sales decrease of 1.5% in their consumer goods division, and a decline of 0.1% in the medical devices division.
Even with this mixed bag of results, Johnson & Johnson (NYSE:JNJ) remains upbeat on future growth, especially with the aging US population. For improving the consumer goods division, the company is looking to continue to grow internationally, specifically in Russia and Brazil, while in the US, they will work on making their products that are market leaders gain a larger share of the pie.
For the pharmaceutical division, J&J has 10 products in its pipeline that they are developing and are hoping to gain FDA approval. They recently received positive news with the clinical trials of their psoriasis drug.
And with the medical device division, Johnson & Johnson (NYSE:JNJ) is looking at growing this segment through various acquisitions.
Overall, the company is reinvesting in itself and continuously looks through its large portfolio of assets. They will divest an asset when it makes sense and they will acquire companies when it makes sense.
In 2015 they began a $10 billion share repurchase program and have raised their dividend for 54 straight years.
