The diversified business of the company has made it stronger in all types of economic conditions.
The beginning of 2016 has not been much good to the healthcare sector. The Nasdaq Biotechnology Index plummeted down by 22% year to date, which made Market Vectors Pharmaceutical ETF to tumble down by 10% through February 18. However, Johnson & Johnson is still the better option of investment for investors.
The inception of the business dates back to almost 130 years ago. Ever since its commencement of business, Johnson & Johnson has introduced so many products to its customers, which are being used by the consumers for a long time now. The products have allowed the organization to have a strong lineup of consumers, who have also built up emotional attachment with the products because of their long existence, and naturally, the revenue of the company cannot be compromised in the long run.
Not many people know about the company’s colossal 250 subsidiaries that make the parent ‘Johnson & Johnson’ a titan in the industry. Although dynamics get complicated with a large number of subsidiaries, the diversity of the company prevents it from being so much affected by the unfavorable economic conditions. The buying and selling of the assets can be conveniently carried out.
J&J’s extensive research and development is pivotal in the company performance. According to Fortune, the $290 billion organization had spent around 11.5% of its revenue; $8.2 billion, on research and development in 2013. These humungous investments in R&D are generating exactly according to the organization’s intentions. It allows it to bring innovative products in the market.
J&J’s medical device unit has a long way of boosting its revenues as the products pertaining to this specific device can grab major chunk of market share. Another brownie point for the business is its inelastic products. The healthcare titan manufactures such products that have stable growth. With a little exception of elective surgical procedures, the overall demand for the biotech company will remain high and strong.
The medical giant also has around dozen of organizations dubbed as Dividend Aristocrats which, for their shareholders, have been raising the annual dividend payment for around 25 consecutive years. Johnson & Johnson, exclusively, has been raising the dividend payout for 53 straight years. Its significant 3% yield is higher than the S&P 500 current average yield of 2.4%.
One of the greatest credits that the New Jersey firm has to its name is the prestigious AAA credit rating from Standard & Poor’s. For the past 10 years, it has been producing around free cash flow worth $11.4 billion. It has been lucky enough to get the best of the leaders to take on the reins of the company. The current CEO Alex Gorsky has been associated with the company for 24 years and is likely to contribute more efficiently for it.
At the market close down on Tuesday, Johnson & Johnson stock price stood at a hefty price of $104.74. The 52-week range of the stock is $81.79 to $105.49. Since January 1970, the share price has raised by 9,400% while about 1,000% has increased since January 1994. The New Jersey based healthcare giant has a P/E of 18.6 and forward P/E of 14.8 in comparison with the S&P 500 P/E of 20.6 and forward P/E of 15.3.
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