Back in February, I wrote that blue chip pharmaceutical and consumer products company Johnson & Johnson (NYSE: JNJ) was a fantastic “dividend Band-Aid” for a volatile market.
Well, two months later, it’s funny how little has changed.
The S&P 500 rallied hard for much of March. But now in April, the usual suspects — inflation and hawkish language from the Federal Reserve — are rattling markets again.
As I write this, the S&P 500 is down about 5% for the year, and its momentum looks shaky.
Yet our dividend Band-Aid from February is near its highs for the year. In fact, JNJ looks more attractive today than it did when I first talked about it. After a brief turn lower, JNJ is up 4% since I talked about it on February 2.
Let’s dig into the numbers using our proprietary ratings system to see why.
Johnson & Johnson’s Stock Power Rating
Johnson & Johnson rated a “Bullish” 68 on our Stock Power Ratings system in February. Today, it rates even higher at 73. That’s fantastic for a company so old and stodgy that its roots go back to the 1880s!
Johnson & Johnson’s Stock Power Rating on April 12, 2022.
Let’s do a deeper dive.
Volatility — JNJ rates highest on our volatility factor at 97. As I wrote back in February, this is the definition of a low-drama stock. While much of the rest of the market has struggled this year, Johnson & Johnson has been a rock of stability.
I can’t tell you that JNJ has the risk profile of a bond, as it’s still a stock. But JNJ is about as close to a bond as you can get in the mainstream stock market.
At current prices, it yields 2.4%, just a little less than a 10-year Treasury. But unlike a Treasury, JNJ’s payout should rise over time!
Quality — Johnson & Johnson is in the top 5% of all stocks we rate on our quality factor, with a score of 95. One might argue that any stock that’s been around since 1886 is a high-quality company. But our objective quality rating is based primarily on profitability. JNJ’s branded products and patented pharmaceuticals command a premium, and that premium is reflected in its margins.
Growth — One of the top reasons I like Johnson & Johnson’s stock today is because of its consistency and stability. But it’s no slouch on growth, rating a solid 80 on our growth factor. And while the rollout of its COVID-19 vaccine was a nice bump, that doesn’t fully explain the high score here. We track growth over varying time frames of up to 10 years to avoid the possibility that recent results skew the score. A solid score here represents years of impressive growth.
Momentum — This is a case of winning by not losing. JNJ rates a solid 65 on our momentum factor, as investors’ flight to safety has created strong buying pressure that has pushed the shares higher. I expect that to continue for as long as the market remains choppy.
Value — Quality and value often have an inverse relationship. Investors pay up for quality, so stocks that tend to rate well on that factor often rate lower on value. JNJ is no exception. It rates a 30 on value. I’m OK with that. We’re looking for stability, and I don’t mind paying for it.
Size — JNJ is huge, with well over a century of life as a public company. This is not some undiscovered small cap! JNJ rates a 1 on our size factor.
Bottom line: I can’t tell you if the market is sliding into bear market territory or not. But regardless of what comes next, Johnson & Johnson is a solid dividend payer that won’t give you heartburn.
To safe profits,
Charles Sizemore
Co-Editor, Green Zone Fortunes
Charles Sizemore is the co-editor of Green Zone Fortunes and specializes in income and retirement topics. He is also a frequent guest on CNBC, Bloomberg and Fox Business.