The Dividend Diplomats Recent Buy – JNJ

The Dividend Diplomats were at it again!  We both had bought the same company on Tuesday June 16th and we couldn’t be any more happier/excited with the purchase.  The best part about it, neither of us had any idea we purchased the stock.  We just sent each other a message discussing the purchase and it just so happened we set up the same automatic on Sharebuilder.  The stock was back down a handful of dollars per share and in this volatile stock market environment, the company was too good to pass up on the price point and with the “legendary” status it has.  We bought had made the purchase – an additional allocation and one a whole new stock.  We purchased Johnson and Johnson (JNJ).  Let’s see why we bought them!

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Johnson & Johnson

To save time, you can read the first time, Lanny initiated the purchase and the 2nd re-up that Lanny also had.  Further, JNJ was on Bert’s watch list during the month of May as well… talk about getting a lot of attention!

Dividend Diplomat Stock Screener Results

Time to quickly run JNJ through our stock screener:

1.) P/E Ratio at Time of Purchase = With projected EPS of $6.13 and a purchase price of $98.04, the P/E is 16 so below the industry and below the S&P of approximately 20 at the date of purchase.

2.) Yield at Time of Purchase = $98.04 was the purchase price and with a current dividend of $3.00 based on the recent increase announcement, the yield is at 3.06%.  Much higher than the S&P 500, I like this foundation stock!

3.) Payout Ratio = at a current projected EPS of $6.13, this puts the payout ratio at approximately 49-50%, smack dead in the middle, love this as half the income goes to investors and the other half stays within the company.  Also – still leaves room for the #5 of the growth rate history as well.

4.) 5 Year Dividend Yield Average = The 5 year yield average is approximately 3.10%.  So not really over or undervalued per say, but appropriately valued regarding this metric, as it’s almost spot on.

5.) Dividend Growth Rate and History = As discussed in the previous posts, amazing track record – 50+ years and is at 7.10% average in 3 years and 7.24% average increase over 5 years.  Better than my overall portfolio currently, so I’ll take that growth rate.

Why did Lanny Purchase more?

Not just because of the reasons above, but as I described in an earlier post or posts, I would love to have bigger positions of stronger companies.  I previously had $1.5K of cost invested and wanted a round $3K, and this, well, this definitely did it, as I spent $1,500 additionally into JNJ adding over $46 in projected income for my portfolio (now my JNJ position spits out approximately $90 per year, loving it!).   Therefore, I almost have at least 1 share going in almost every year with reinvestment.  This is awesome and given that the power of reinvestment is huge, this amount will only continue to go up, and guess what – I feel great about that.

Why did Bert Initiate a Position?

Lanny, nice analysis up there.  It fits our stock screener to a T and shows why you and so many other bloggers in the community purchased shares of JNJ over the last month.  I am jealous of your position in the company; however, I am coming for you and hopefully I will be adding to my position over the next month or so to establish a sizeable position in my portfolio.  I definitely want more of this iconic, foundation stocks!  But I am putting the cart before the horse here, as I haven’t even talked about why I purchased JNJ in the first place.   My reason for purchasing is slightly different, so here we go.

Last weekend, I identified a stock that I was interested in purchasing, Genuine Parts Company, and performed a stock analysis to see if it was a no-brainer investment that I thought it was after the market began its slide last week.  While the results showed GPC is a great company with a great dividend track record, it didn’t wow me the way I was hoping and after the analysis, I simply rated JNJ as a better stock for my current portfolio.  JNJ has a higher current yield, the PE Ratio is currently lower, and the company has a larger share buyback program than GPC.  While some don’t view share buyback programs as a big deal, we think it can provide huge benefits to dividend investors.  Again, very comparable companies, but the few differences between the two companies were enough to tilt the scale towards JNJ.  So I purchased 17.24 shares, adding $52 in dividend income to my portfolio.  I couldn’t be happier with this entry-level position and one day, I ideally would like to increase this amount to $75 before all is said and done.

Conclusion

Not a bad day at the office.  In total, we both added $98 in total dividend income to our portfolios.  Come on, can’t believe we were just shy of triple digits….MAN!   Sometimes as investors, we can over-think decisions trying to find the best deal when there is a great, solid investment right in front of our eyes.  That’s why this purchase was perfect for us and we both took advantage of yet another down period for the stock.

What are your thoughts about our purchase?  Have you bought JNJ recently?  Or have you purchased a different stock in this pullback?  If not, are you planning on making any moves soon?

-The Dividend Diplomats

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24 thoughts on “The Dividend Diplomats Recent Buy – JNJ

  1. Bert and Lanny,
    JNJ is a beast. Its a little down on its luck now for sure, but its hard to not take that position. JNJ along with a few others like TROW and UNP are all sitting at excellent values. Yet the market right now is overvalued… the opportunist in each of us can always find something good, even when the search turns up fewer places to invest.
    Enjoy the income,
    – Gremlin

    • Gremlin,

      Thank you very much. I have been tracking JNJ for quite some time (well over a year now) and finally the stock delivered me what I wanted…a pullback that allowed me to buy in a great time. There are a ton of great opportunities that have popped up over the last week and I am happy that I was able to take the opportunity to buy two different Dividend Aristocrats (I purchased ED a few weeks ago). I love your description here…opportunists. We all monitor the market so closely that we are waiting for moments like this to pounce on a stock like JNJ. Man do I love this stuff haha Are you getting ready to buy any stocks?

      Thanks for stopping by!

      Bert

    • Thank you Mike! Great company, great growth rate, and best of all, long-time dividend payer and grower. What’s not to like haha Luckily, us and many other DGI have been able to take advantage of the downturn and either increase our stakes or initiate a position.

      Bert

    • Hustler!

      Thank you very much. This is about as consistent of a stock as you are going to get. I can’t wait to add more to my portfolio soon, so hopefully the price stays depressed long enough for my funds to transfer into my Sharebuilder account. Have you added any recently?

      As always, thanks for stopping by!

      Bert

  2. Great buy…we have JNJ in our family’s dividend stock portfolio and bought under $100 mark as well! JNJ has a solid track record and should continue to produce for us both for years to come.

    Cheers to ongoing future dividend growth! AFFJ

    • AFFJ,

      Thank you for coming by the post! Buying under the $100 just sounds great with JNJ right now. I feel like they can easily maintain a 7%+ growth rate on the dividend for years to come – so cheers to that!

      Thank you and hope you have a great weekend!

      -Lanny

  3. Hey guys, I love this buy. I have been watching the JNJ stock drop and figured it was only a matter of time before one or many of us started adding to our positions. I will likely do the same in coming weeks. Keep up the good work!

  4. Hi there Lanny and Bert,

    I have been following your blog for some time and finally decided to leave a small comment. Got myself to buy some more JNJ too, value was very interesting as you outline very nicely. I have been also cleaning up my portfolio to start reinvesting in some bigger and more “core” companies, after a very “quick” start of my financial independence career (back in Dec 2014) where I have got too many stocks on hand I have decided to backtrack a little and be more concentrated… Anyhow, keep up the good work and all the best!

    Ciao ciao

    Stalflare

    • Stalflare,

      Thanks for coming on by – nice work grabbing some JNJ at a good price point. Also – never a bad idea to have core holdings that you’re building up continuously. You keep up the good work as well and it means a lot that you follow us!

      Ciao!

      -Lanny

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