Where Will Johnson & Johnson Be in 5 Years? - The returns on the stock over the last decade haven't been very good. Should investors be expecting this to change?
Johnson & Johnson ( JNJ 1.03%) is a company that could look different in the coming years. The top-selling drug Stelara is currently facing an imminent patent crisis this year. The company has recently spun off an of their business divisions, and it’s unclear if its legal problems will be resolved.
Here’s a look at a few of the potential and threats for the company, as well as when it’s the right time to include the shares from Johnson & Johnson in your portfolio.
Could it be an attractive growth stock?
One of Johnson & Johnson’s biggest disadvantages is that, over the years, although it’s been a reliable investment, it hasn’t produced any significant growth. Even with a wide range of businesses which included the areas of consumer health, pharmaceuticals and medical devices, the growth rate hasn’t been particularly impressive, as shown in the graph.
Since the company has been able to separate itself from consumer health, it has increased its resources to pursue more aggressive growth opportunities possibly. The year 2020 will see J&J purchase Momenta Pharmaceuticals for $6.5 billion. In the year prior, it acquired heart pump manufacturer Abiomed for a much larger $16.6 billion price. Having more of these acquisitions in the coming five years shouldn’t be surprising as it tries to diversify and expand its business.
Johnson & Johnson previously projected that without mergers and acquisitions, its pharma business could reach $60 billion in sales by 2025, including the loss of exclusivity on the top-selling drug Stelara. In 2017, Johnson & Johnson reported $52.6 billion in revenues from its pharmaceutical business.
If the company can settle its talc lawsuits, it could do since the recent proposal appeared to be a hit with plaintiffs’ lawyers. Then Johnson & Johnson may be better positioned to explore acquisitions, being aware that the necessity to save money to cover litigation costs won’t be as costly.
The pending lawsuits pose the greatest risk for the company, and If Johnson & Johnson can put the matter to rest, then there is a chance for the company to become more aggressive in its approach to acquisitions. This could result in an increase in growth in the future for Johnson & Johnson.
Will the dividend continue to grow?
It’s a foregone decision. Johnson & Johnson will likely continue increasing its dividend, as it has for 61 years. It’s hard to imagine how Johnson & Johnson would end the streak. If a disease hasn’t ruined it or brought about multiple recessions over many years, it’s tough to imagine what would happen now.
The only real risk lies back in the talc lawsuits. If costs and legal obligations were to grow until they could harm the company, the dividend could become an inevitable casualty. However, that’s with grim prospects.
Johnson & Johnson will likely keep its streak running. The only thing to consider is the amount of increases. The company could increase its dividend by $0.01 to keep this streak running.
Johnson & Johnson’s most recent dividend increase was 5.3 percent, lower than the 6.6 per cent increase one year ago. If the company focuses on increasing its growth rate, then dividend increases may be less frequent shortly.
Are Johnson & Johnson stock a purchase today?
Johnson & Johnson is generally an income-producing investment you can keep for the long run. If dividends and safety are important to you, this is a must-have to purchase the stock, especially because it’s just a few weeks away from its 52-week lowest point.
If you are focusing on growth, there are likely faster-growing stocks you can invest in. Despite its dividend in the past ten years, Johnson and Johnson’s overall return of 147% was significantly lower than its S&P 500‘s 227% increase. It’s not something I can see changing in the coming five years.
Although Johnson & Johnson will likely buy more companies, it hasn’t yet demonstrated that it will pursue massive, transformative business acquisitions. This is likely required for it to become an investment that is a more important choice for investors looking to grow.
In the end, Johnson & Johnson has been a safe stock, and investors should be aware that they’ll likely lose some of the gains they’ll earn from this investment to ensure stability in the long run. If you’re okay with that, it could be a great health-related stock to invest in and keep.
Did you use Johnson & Johnson talcum powder and suffer cancer?
If so, you may be entitled to compensation. Johnson & Johnson has been accused of knowing that its talcum powder products contain asbestos, a known carcinogen. As a result, many people who use these products have developed cancer, including ovarian cancer, lung cancer, and mesothelioma.
If you or someone you know has been diagnosed with cancer after using J&J talcum powder, you should contact an attorney immediately to discuss your legal options. You may be able to file a lawsuit against Johnson & Johnson and receive compensation for all of your medical expenses, lost wages, pain and suffering, and other damages.
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