How to Buy Johnson & Johnson (JNJ) Stock

Johnson & Johnson (NYSE: JNJ) is the largest pharmaceutical company in the world and the tenth-largest U.S. corporation by market capitalization at $376.62 billion. The pharmaceutical sector is one of the most profitable in both the U.S. and U.K. economies. 

Johnson & Johnson stock is the granddaddy of health care stocks, and after months of research and development, Johnson & Johnson (NYSE: JNJ) finally received emergency FDA approval of its vaccine on February 27, 2021. The emergency order covers distribution to individuals in the U.S. 18 years of age or older. The JNJ vaccine is 85% effective at preventing severe COVID-19 cases after 28 days post-vaccination. 

In a surprising turn of events, rival pharma company Merck (NYSE: MRK) has agreed to help in the production process. By the end of 2021, the company expects to manufacture 1 billion doses of its single-dose vaccine. 

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JNJ: Company and Stock History

New Brunswick, New Jersey-based Johnson & Johnson was founded in 1886 by 3 brothers: Robert, James and Edward Johnson, who had been working in a medical products business and decided to go out on their own.

One of the company’s early innovations was the first commercial first-aid kit, introduced in 1888. The company began its expansion in the 1920s, opening offices in the U.K. and Canada and continued growing by purchasing other companies involved in health care products, such as Janssen Pharmaceuticals and Janssen Biotech, DePuy, Ethicon and Actelion.  

The company’s 3 major divisions include pharmaceutical, consumer and medical devices and diagnostics. The firm’s pharmaceutical division provides a wide array of medical products for the treatment of infections, as well as for other medical purposes, including contraception, oncology, neurology, immunology, hematology, dermatology, pain management and vaccines.

Johnson & Johnson’s consumer division sells products for oral care, skin care, baby care and nutritional care as well as over-the-counter medical products. The medical devices and diagnostics division provides orthopedic joint reconstruction, spinal care, surgical care, sports medicine and women’s health products. 

In 1944, Johnson & Johnson went public in an initial public offering (IPO) at $37.50 per share on the New York Stock Exchange (NYSE) under the symbol JNJ. After adjusting for splits and dividends, JNJ stock was trading under $1 per share in June of 1970 and by February of 1990, the stock had reached $6.70 per share. JNJ stock then increased to $52.40 by October of 1999.

JNJ stock then traded between $50 and $70 per share until December of 2012. The stock has since gained consistently after breaking out of that particular range and currently trades at $141.85 per share.  

Future Outlook for JNJ

After declining notably from $72 to $46 per share during the 2008-2009 global financial crisis, JNJ stock has since traded higher overall along with the U.S. stock market in general. The stock has also had six stock splits since its IPO. Two of them were 3 to 1, while 4 of the splits were 2 to 1, with the last split taking place on June 13, 2001. 

Johnson & Johnson has had 56 consecutive years of dividend payment and growth. This impressive track record of providing its investors with income makes the company both a “dividend aristocrat” due to having at least 25 years of consecutive dividend increases, as well as a “dividend king” by having a minimum of 50 years of dividend growth.

Just 25 other companies in the entire S&P 500 group qualify for that prestigious dividend king title. The current trailing 12 month (TTM) dividend payout for JNJ is $3.80, which implies a dividend yield of 2.68% at the stock’s current price of $141.85. 

Johnson & Johnson remains 1 of only 2 U.S. corporations to retain a AAA credit rating from Standard & Poor’s Corp. (S&P) in the wake of the 2008 financial crisis and Exxon Mobile’s downgrade in 2016.

This means that these two firms’ top credit rating even beats out that of the U.S. government, which only has an AA+ rating, as well as all other corporations based in the United States. The company’s impressive dividend history and stellar credit rating attest to the efficiency and profitability of its business model and makes JNJ stock a top investment for dividend income. 

As far as capital appreciation is concerned, JNJ stock has rallied overall with the stock market, but it has recently consolidated within a triangular pattern since peaking at $147.36 on January 19, 2018, and falling to $121.26 on June 1, 2018. The mostly sideways trading seen in JNJ stock over the last year and a half suggests that investors have now priced the stock at a relatively fair value around the center point of that pattern and see little fundamental reason to take it either higher or lower.

Although a triangle pattern can break out in either direction, it does mean that price gains from current levels might be limited near term, especially with the risk of a possible economic downturn looming.

You might want to wait for a decline in the stock ahead of your purchase, even if that just means waiting until it makes another move lower within its existing triangular consolidation pattern. Buying JNJ stock at a lower price would increase its dividend yield, which would make it a more suitable long-term investment for the income-minded investor.

Why You Might Want to Buy It

Here are a few highlights as to why JNJ might be a good buy for you.

Dividend income

JNJ stock’s status as an S&P Dividend King makes the stock particularly attractive to investors who concentrate on dividend income and yield. The company is also the only one with a Dividend King ranking in the healthcare sector of the U.S. economy. 

Defensive in an economic downturn

JNJ stock can retain a good part of its value during economic downturns, making it a defensive investment, given the significant potential for future weakness in the U.S. economy. In addition, the company’s dividend yield, which increases as the stock’s price falls, would tend to create demand for the popular and top-rated stock, thereby usually mitigating its losses overall. 

EPS growth

JNJ stock has seen its earnings per share (EPS) increase consistently over the last 10 years. While this trend could reverse, some analysts expect its EPS to continue to increase by 6% per year through 2024.

Considerations Before You Buy

Before you add JNJ to your portfolio, make sure to consider these points.

Stock market/economic downturn

In a severe economic downturn, even defensive stocks like JNJ can lose some of their value. Worsening employment numbers and reduced expendable income can reduce demand for Johnson & Johnson’s products and services. This causes slowing revenue that would adversely impact the company’s earnings per share and, ultimately, its stock price and possibly its dividend payments. 

Stock near historical highs

The all-time high for JNJ stock is $147.36 per share, which is only just over 4% higher than its current share price of $140.69 per share. The high price of JNJ shares reduces its dividend yield and the chances for future capital appreciation when investing in it.

Lawsuit exposure

The number of lawsuits pending against Johnson & Johnson has grown over the years, and it exceeded 100,000 as of 2018. The lawsuits have been filed for many products made by the company.

It also includes defects in its medical devices, side effects in pharmaceuticals such as Risperdal, which accounts for over 18,500 lawsuits and more than 24,000 lawsuits for a vaginal pelvic mesh product that caused erosion, infection, recurring incontinence and urinary problems in women.

As a further example of the risk involved, in July 2018, the company was required to pay 22 women and their families $4.69 billion in claims due to the presence of carcinogenic asbestos in Johnson & Johnson’s talcum powder that they believe led to their development of ovarian cancer.

Payouts for multiple lawsuits like this could adversely affect earnings, dividends, and eventually, JNJ’s stock price. 

You can buy Johnson & Johnson stock right now if you have a funded account with a reputable stockbroker with access to trade stocks listed on the NYSE. If you plan to buy JNJ stock for dividend income and long term capital appreciation, you might want to consider buying your stock through a discount broker. While you might not get access to in-depth research and other extras offered at full-service brokers, you would pay a smaller commission.   

Keep in mind that how you buy Johnson & Johnson stock is just as important as where you trade, so make sure you pick the right broker.

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Is This Blue Chip Stock for You?

JNJ stock has been a stellar long-term investment for many patient individual investors and institutions. The stock pays a dividend which has increased every year for 56 years, an achievement that very few companies have ever replicated. This dividend provides yearly income for investors that exceeds the return of a U.S. Treasury Note.

The company also has a AAA S&P rating, which also beats the T-note since the U.S. government currently only has an AA+ rating. 

Though your investment in JNJ stock may not immediately provide substantial capital appreciation due to a likely economic downturn affecting the overall stock market, the company has proven that an investment in JNJ stock has a strong likelihood of providing a substantial capital return over the long term, in addition to reliable income from dividends. 

If you're looking to start building out your portfolio, check out Benzinga's educational resources on how to develop an investment strategy with the best online brokers for beginners.