Johnson & Johnson (NYSE: JNJ) – An in-depth Stock Analysis

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by 036Gooddaysir036


Good morning everyone. It is apparent that JNJ is going to win the poll (on r/dividends), so here is the post as promised. The poll still has a little time, an analysis will be done for whichever stock is in 2nd place, and last place. Additionally I am considering grabbing one from the comments.

Anyways, Since this is a more in-depth look at the stock we will be answering the same questions again.

There will be a few questions we are looking to answer:

  1. Is there revenue growth?
  2. Is there earnings growth?
  3. Is the company really leveraged?
  4. Is there strong cash flow?

Let’s start by taking a look at the business model and moat.

JNJ – Johnson & Johnson:

Johnson & Johnson is classified as a Dividend King, they have paid dividend continuously since 1963 and increased for 58 consecutive years.

Johnson & Johnson is the world’s largest and most diverse healthcare company. Three divisions make up the firm:

  • pharmaceutical,
  • medical devices and diagnostics,
  • consumer good/discretionary

The pharmaceutical and medical devices account for ~80% of sales and generates most of the cash flow. The drug division focuses on the following therapeutic areas:

  • immunology,
  • oncology,
  • neurology,
  • pulmonary,
  • cardiology,
  • metabolic diseases.

The device segment focuses on surgery tools, orthopedics, vision care, and a few others. The last segment of consumer focuses on baby care, beauty, oral care, over-the-counter drugs, and women’s health.


– Johnson & Johnson is one of the well known and trusted brands in the world. It it one of the most consistent earnings growers.

– Their 3 healthcare segments provide unequaled diversity of quality products for the healthcare industry.

– Developed nations have populations whose average age is increasing rapidly. Older people consume, on average, 7 times as much healthcare services and products as younger people. In addition, the growing global middle-class will be consuming an increasing amounts of healthcare. This will further increase their sales.

– The company is more resistant to competitors due to its established distribution network and sales.


– Litigation surrounding several J&J products have the potential to blemish the company’s reputation and cost billions of dollars. There is currently an ongoing talcum powder lawsuit.

– They are subject to more broad threats to the privatized healthcare industry, to include: increased regulation/scrutiny from consumers and government, plans for more government run healthcare, and increased risk of higher lawsuit costs. There are plenty of other threats to the healthcare industry as a whole, however JNJ is more resistant to the institution of gov’t funded healthcare since they provide so many products. However there is always the threat of decreased profit margins as regulations call for price fixing.

(NOTE: This is not an endorsement for or against either Government Funded/Privatized Healthcare, this is simply mentioning a potential risk to the company due to a changing environment, nothing more)

Financial History:

One thing that is really nice about Johnson and Johnson is their company financial performance sheets give 10 years of history, most of the time companies will just do 3, or 5 years, so they are definitely not trying to hide anything, and as we will see below, they have no reason to.

Year Revenue EBITDA Debt Debt / Earning
2011 $65,030 $19,389 $14,179 0.7
2013 $71,312 $23,161 $15,123 0.7
2015 $70,074 $22,116 $15,200 0.7
2017 $76,450 $24,539 $32,183 1.3
2019 $82,059 $28,079 $28,579 1.0

The revenue has increased an average of 3% average, the earnings has increased faster than the top line revenue at 4.7% average, and they are very under-leveraged when it comes to debt, especially compared to some recent companies we have seen (IBM, KO, PEP).

Year Cash Flow from Operations Capital Expenditures FCF/E Ratio
2011 14,298 2,893 15,859
2015 19,569 3,463 16,113
2019 23,416 3,498 17,098

Increases straight across the board. CFO has increased 6% average, their CAPEX has increased by an average of 2%, but regardless their Free Cash Flow to Equity ratio is increasing despite them putting more money back into the company. They have been using some of their additional cash flow to pay down debt, the debt payment for 2019 was $2.82 Billion. Dividend Payments accounted for ~$10 Billion, and with some of the remaining the company bought back shares.

So …

  1. Is there revenue growth? – Yes
  2. Is there earnings growth? – Yes
  3. Is the company really leveraged? – Very low debt
  4. Is there strong cash flow? – Yes

Some other numbers:

NOTE: Current for November 2020 and very likely to change.

Current Annual Payout / Share $4.04
Yield 2.76%
10 Yr Div Growth Rate 6.9%
3 Yr Div Growth Rate 6.0%
1 Yr Div Growth Rate 5.9%
Current EPS Payout Ratio 64.64%

From a dividend growth standpoint, this would potentially be a great portfolio inclusion. With many companies the 1/3 year dividend growth has been decreasing, JNJ has been maintaining and they have strong prospects of increasing the dividend growth rate again.

Let’s project what the Annual Dividend Payout could be using a 6% constant growth rate. (NOTE: Just an estimate, not a guarantee of what could happen)

Year 2021 2022 2023 2024 2025
Payout $4.28 $4.53 $4.81 $5.10 $5.40


Final Thoughts:

From a financial perspective, JNJ is incredibly healthy, they have increasing revenue, earnings, low-debt, and high cash flow. Additionally, they responsibly uses their cash flow to pay down debt, pay their shareholders, and buy back shares. Furthermore, the dividend history and growth is very consistent.

There are definitely some risks to consider, the company does face lawsuits often enough and the details/payouts for those were not discussed here. Additionally the health care sector is more subject to a changing environment due to the expansion/introduction/rollback of regulations and expansion of public healthcare options. Take this into consideration.

I hope everyone found this post interesting, please supplement this with your own research.

As always, thanks for reading, and have a good day/night!


Disclaimer: This information is only for educational purposes. Do not make any investment decisions based on the information in this article. Do you own due diligence or consult your financial professional before making any investment decision.


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