2 Reasons to Buy Johnson & Johnson Stock Like There's No Tomorrow
Key Points
J&J has gone through several shifts in recent years -- and demonstrated its strength.
The company has many products and platforms that deliver billion-dollar revenue.
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Johnson & Johnson (NYSE: JNJ) reached a transition point a few years ago. The company spun off its consumer health business into Kenvue in order to shift its focus and financial resources to its innovative medicine and medtech businesses. J&J did this because these areas showed stronger growth potential moving forward.
Meanwhile, J&J's top-selling drug, immunology drug Stelara, lost exclusivity, representing a clear headwind for the pharma giant.
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Since those times, J&J has demonstrated its strength: It's successfully managed the growth of its two main businesses -- even through declines of Stelara. Now, here are two reasons to buy J&J like there's no tomorrow.
Image source: Getty Images.
1. Strength during times of uncertainty
The S&P 500 has slipped this year, amid a variety of concerns, from questions about spending on artificial intelligence (AI) to worries about the war in Iran. Meanwhile, J&J shares have climbed 15%. Pharma stocks generally perform well during times of uncertainty because investors know that risks to their growth are limited -- patients need their medicines and procedures regardless of the economic backdrop.
All of this means pharma players are great stocks to own during such environments. And the reason why J&J in particular makes a solid buy now is that the company's portfolio is looking strong. J&J has 28 platforms or products bringing in at least $1 billion annually. In fact, the company recently said it can now place the Stelara loss of exclusivity "in the rearview mirror."
2. Dividend growth
J&J is a Dividend King, meaning it's increased its dividend annually for at least 50 years. This shows a commitment to rewarding shareholders -- so you can buy J&J shares with the idea that your passive income will keep on growing.
The pharma giant's free cash flow levels offer further evidence that the company may continue along this path. This shows J&J has the financial resources to lift its dividend year after year.
JNJ Free Cash Flow data by YCharts
J&J pays a dividend of $5.20, representing a dividend yield of 2.1%, surpassing the 1.1% dividend yield of the S&P 500. You'll particularly appreciate this passive income during difficult stock market times, making J&J a top stock to buy right now.
An important note
Finally, an important point to note. Just because J&J may help strengthen your portfolio during declining markets doesn't mean you should sell the stock when the market is soaring. J&J, due to the strength and diversification of its product portfolio, which should keep earnings marching higher, is a fantastic stock to own throughout any market environment. So, after buying the stock like there's no tomorrow, it's a good idea to hold onto this top pharma player for the long term.
Should you buy stock in Johnson & Johnson right now?
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Adria Cimino has no position in any of the stocks mentioned. The Motley Fool recommends Johnson & Johnson. The Motley Fool has a disclosure policy.
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