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Johnson & Johnson’s (JNJ) stock price has fallen approximately 13% since the beginning of the year. However, operating earnings are expected to increase modestly while operating cash flow is expected to increase 45% or more after dropping 1% in 2020 and 9% in 2022. Nevertheless, Johnson & Johnson’s dividend is well covered and the company’s balance sheet contains enough cash and short-term investments to cover any contingent liabilities from several lawsuits on talcum powder and opioids.

From a valuation perspective, Johnson & Johnson has fallen into fair value territory, but we do not consider it dramatically undervalued. Consequently, for those investors who are looking for high quality, and above-average dividend yield approaching 3%, Johnson & Johnson may be just the ticket. The point is that the future return is expected to be positive but single-digit. Considering the quality of this AAA-rated behemoth with a strong balance sheet, it could be attractive to many types of investors. We consider Johnson & Johnson a solid hold and a reasonably valued buy at this time. In order to receive a true margin of safety, Johnson & Johnson would have to fall further from here which may or may not occur. Caveat emptor.

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