Dividend Stock Analysis Of Johnson & Johnson (JNJ)

Johnson & Johnson (JNJ), together with its subsidiaries, is engaged in the research and development, manufacture, and sale of various products in the health care field worldwide. The company operates in three segments: Consumer, Pharmaceutical, and Medical Devices & Diagnostics. This dividend king has paid dividends since 1944 and has managed to increase them for 57 years in a row. Dividend increases have been like clockwork every year for decades.

Johnson & Johnson earned $3.63/share in 2007 and managed to grow earnings to $6.31/share in 2017 (adjusted for the provisional amount of $4.94/share associated with the recent enactment of tax legislation as well as a 90 cent/share charge for intangible amortization expense). The company just announced its latest earnings for 2018, which come out to $7.03/share. The amounts include $1.42/share in annual intangible amortization expense. I add this back, because it is a non-cash GAAP requirement, which requires companies to amortize intangible assets such as trademarks for companies they acquired. In other words, you amortize an intangible asset mostly due to accounting rules, and that doesn’t really follow the economics of how trademarks work for example. There is another process, where intangible assets that lose all of their value are written off as an impairment, which is when it may make sense to adjust earnings for those events. Anyways, Johnson & Johnson is expected to earn an adjusted $8.53-$8.63 per share in 2019, which is up from $8.18 adjusted EPS in 2018. Adjusted earnings guidance excludes the impact of after-tax intangible amortization expense and special items.

Johnson & Johnson has a diversified product line across medical devices, consumer products and drugs, which should serve it well in the future. This makes the company somewhat immune from economic cycles. Investors looking fora safe and dependable earnings can look no further than Johnson & Johnson. In addition, the company has strong competitive advantages due to its scale, leadership role in various diverse healthcare segments, breadth of product offerings in its global distribution channels, continued investment in R&D, high switching costs to users of its medical devices, as well as its stable financial position.

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