Johnson & Johnson JNJ - Making us healthy, making healthy profits
 

Kenneth J. Dickson

Johnson & Johnson JNJ - Making us healthy, making healthy profits

We're looking at JNJ and their prospects of success in this, the fourth installment of my look at the Dow Jones Companies, the thirty finest American companies. Today we'll be looking at Johnson & Johnson.

This company was (at time of original publishing) trading at all time highs, and must be one of the few companies in the Dow that is trading up in difficult times. In fact, in the last five years, its dividend has doubled!

JNJ Origins

In 1886 Robert Wood Johnson founded the Johnson & Johnson Company with a business plan to provide the medical profession with sterile dressings and sutures. His goal was to run a thriving business that would support his family and his workers’ families while making the world a better and healthier place.

Branching Out

As JNJ grew, Mr. Johnson began to branch out into other products that would help consumers as well as the medical profession. Listerine antiseptic mouthwash was among the first consumer offerings, a product that is still with us today in the 21st century and whose sales are consistently steady despite competitors. Always interested in improving the health of his customers, the company looked for ways to help children and parents, designing and marketing the incredibly popular Band-Aid.

Johnson & Johnson has always received incredible brand loyalty from their customers, not only because they manufacture superior products but because of their community involvement. The corporation was among the first in the nation to establish an official disaster relief program, beginning with the great Galveston Hurricane in 1900, J&J has been at every major disaster, their bright Red Cross logo a welcomed sight for victims and aid personnel alike.

Earnings, Dividends, and Happy Shareholders?

J&J is a company that has had years of consistent earnings, paying dividends to its shareholders every year. Aside from producing products that people actually need on a day to day basis, they’ve branched out into medical research and development, baby products, personal hygiene care and many over the counter drugs that consumers buy and doctors endorse.

From 1997 to 2007, shareholders saw their returns increasing with each year and only in the gloomy economic climate of 2008 have the dividends not increased from the previous year. Returns average 9.1% compared to 5.9% for the Standard and Poor’s 500 companies.

Rationale?

Good investments usually have two things in common: product that people or businesses cannot do without and good management. J&J has both, providing products for the medical profession and hospitals as well as consumers. Over the past few decades, this company has acquired pharmaceutical companies as well as dipping its hand into the lucrative health insurance industry.

With products spanning the medical world from knee and hip replacements to teeth whitening, Superman Band-aids to Tylenol and Motrin, Johnson and Johnson appears to be an investment that consistently profits from reinventing itself and its products in order to serve the public and make the world a better place.

And the future...?

With an aging population, increasing spending on healthcare costs, JNJ stock stands poised to make super returns in the next couple of decades. Do you think you should be investing in this company?

This post was first written and published in 2008. Since then, the JNJ stock has traded down somewhat. But still offers a healthy dividend. I don't own any stock of JNJ at the moment, though there is sure to be a box of band-aids in the cupboard somewhere!
Return from JNJ Stock to Dow Jones Index