Recent Buy // JNJ

Last week, in my mid-year review, I mentioned that I was disappointed to have to report that I hadn’t started investing. Between not taking the time to research online discount brokerages and feeling fearful of not having a large amount of cash on hand, I failed my 2Q goal of having $2,500 invested in a taxable brokerage account.  So I decided to but my fears aside and take action.

First, I researched online discount brokerage firms and decided to open my first account with Scottrade. With over 500 branch offices nationwide, reliable customer service, great trading platform, and good reviews, I really couldn’t go wrong. Also their fees are moderately priced. At $7 per trade, Scottrade isn’t the cheapest but it also isn’t the most expensive online discount brokerage out there. I may do a full review in the future after I’ve had more time to really use the platform.

Second, I analyzed the top ten stocks on my stock watch list. I wanted to make sure my inaugural stock was something that fits into my buy and hold strategy. So…

I purchased 10 shares of Johnson & Johnson (JNJ) on 7/8/15 for $98.10 per share.

Recentbuy_JNJ

Overview

Johnson & Johnson is a Fortune 500 company that researches and develops, manufactures, and sells various consumer products in the healthcare field. They operate in three main segments: Consumer, Pharmaceutical, and Medical Devices. You may have heard of/ already purchase some of their consumer products. Have a new baby? You probably use Johnson’s Baby products. Suffering from a headache or allergies of acting up? Maybe you pick up Tylenol or Zyrtec on your next drugstore trip. They sell quite a lot of popular brand products that people use in their every day lives.

Quantitative

  • Revenue has grown by average of 4.61 % per year over last 10 years.
  • EPS is 5.59 and has increased by 7.22% per year over last 10 years.
  • Current dividend yield is 3.06% and pays a dividend of $3.00 per share. JNJ has been increasing dividends for 52 consecutive years and the payout ratio is 48.9%.
  • Debt/Equity ratio is reasonable at 0.22.

Valuation

  • The P/E ratio is currently 17.8 which right in line with it’s 5 yr average. In addition, JNJ P/E is currently below the broader market.
  • I valued the shares using the Dividend Discount Model with a 10% discount and a 7% long term dividend growth rate. The DDM analysis gives me a fair value of $100.

Conclusion

The company is really high quality. It’s hard to go wrong here. And while I would have loved to have bought shares sooner (when it dipped as low as $96 in October 2014 or even $97 in June), I think JNJ is fairly priced.

This purchase adds $30 to my annual dividend income, based on the current $0.75 quarterly dividend.

Full disclosure: JNJ.

What do you think of JNJ? Think the fundamentals are solid for a beginner dividend investor?

Thanks for reading.

Images: Death to the Stock Photo with graphics added by One Woman’s Worth.

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Author: One Woman's Worth

Born with a dollar and a dream. Hoping to double both in my lifetime.

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