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Hype Asset of the Day | October 26th, 2022

Johnson & Johnson (NYSE: JNJ)

The company has been around for more than a century and is a leader in the healthcare industry, a sector that seems to be recession-proof because consumers need healthcare regardless of how the economy’s doing. It operates in three segments: consumer products, medical devices, and pharmaceuticals. J&J is in the process of spinning off the consumer products business, dubbed Kenvue, to separate the higher-growth segments in devices and pharma. With a positive Q3 report, the healthcare mogul has seen an increase in mentions by 117% over the last day, encouraging investors to wonder if this is the right time to take a position in the company. Currently, shares of Johnson & Johnson trade at $171.99.

Positive Hype

With a mammoth portfolio of consumer goods, pharmaceutical, and medical device products, and a track record of not only maintaining but increasing its dividend payout for six decades and counting, there are more than a few reasons to love J&J.

  • Johnson & Johnson's shares are up 4% over the past 12 months, which is a big improvement over the S&P 500 average's 17% drop.

  • Johnson & Johnson is a company with an AAA credit rating, and it's one of the few Dividend Kings on the market, having raised its dividend annually for 60 straight years.

  • The healthcare giant currently pays a dividend yield of 2.7%, and its payout has nearly doubled over the last decade, making it a good bet for investors looking for both dividend yield and growth.

  • The company is also diligent in rewarding investors. It has spent $2 billion this year on share buybacks, with another $3 billion scheduled.

  • The company recorded a stunning $94 billion in revenue in 2021 alone, representing growth of nearly 14% from the prior 12-month period. Its net earnings also surged by 42%.

  • Even in an environment of inflation and supply chain woes, the company listed revenue of $23.8 billion, up 1.9%, and earnings per share (EPS) of $1.68, up 22.6%.

  • JNJ reported an EPS of $2.55 on revenue of $23.79 billion to top the average analyst estimate of $2.52 on revenue of $23.46 billion. Sales rose +1.9%, modestly helped by the higher-than-expected COVID-19 vaccine sales.

  • This top and bottom line growth was fuelled by respective sales increases of 4%, 14%, and 18% in the company's consumer health, pharmaceutical, and medical device segments.

  • Over the past decade, the stock has generated a total return of 202%. That's not too bad, particularly when you consider the S&P 500 has delivered a return of 213%, only slightly above that, in the same period.

Negative Hype

Although Johnson & Johnson has seen major success, no investment is perfect, and this is no exception. Here are some reasons you might not want to invest in J&J immediately.

  • Consumer healthcare, the only underperforming segment, is being spun off into a separate company called Kenvue sometime next year. There is a chance that this could continue to underperform, causing lower returns and maybe losses for investors.

  • On the guidance front, JNJ maintained 2022 full-year guidance midpoints for adjusted operational sales and reported adjusted EPS. However, JNJ now sees full-year revenue between $93 billion to $93.5 billion, down from the prior outlook of $93.3 billion to $94.3 billion. Bloomberg consensus stood at $95.06 billion.


Considering the threat of a worsening recession, investors that are looking for a safe haven can find it in J&J. If you're an investor seeking a company with a history of growth that has the products and competitive advantage to sustain it well into the future, and a rock-solid dividend to boot, Johnson & Johnson could make an excellent addition to your portfolio.

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