Johnson & Johnson Stock is a Safe Haven Amid Market Turmoil

Author: Tim Phillips

September 24, 2020

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Johnson & Johnson (NYSE: JNJ) finished marginally up 0.2% on what was an ugly day for Wall Street. The company announced it has moved into phase-3 development of a coronavirus vaccine.

Tim’s Take:

For investors, nothing exemplifies “stability” more than healthcare giant Johnson & Johnson. The company operates in three major segments; consumer health, pharmaceuticals and medical devices.

News of the phase-3 trial for a potential Covid-19 vaccine was good news – particularly as the vaccine being tested by the company is a one-shot dose. That’s something that other leading vaccine candidates can’t boast about having.

Yet if we look at the big picture, the company has actually managed the pandemic downturn rather well. Its latest quarter saw a 10.8% year-on-year decline in revenue to US$18.3 billion.

Its medical devices segment took the biggest hit as lockdowns globally hit procedures, and thus, demand for medical equipment. However, this was partially offset by an increase in demand for pharmaceuticals.

Dividends and safety

Even more surprising was the fact that Johnson & Johnson raised its first-quarter dividend in April by a solid 6.3%.

A sizeable free cash flow of US$5.5 billion in its latest quarter shows you why it can do this, even amid one of the worst economic downturns in history.

Being one of only two companies globally to be rated “AAA” by credit ratings agencies – the other being Microsoft Corporation (NASDAQ: MSFT) – essentially means that the market views the firm as more credit-worthy (and safe) than even the US government.

For more conservative, long-term investors who are worried about volatility heading into the US election in November, Johnson & Johnson’s Dividend Aristocrat status is also appealing. 

Furthermore, the stock’s 2.8% dividend yield could serve as a useful ballast in any portfolio.

Disclaimer: ProsperUs Head of Content Tim Phillips owns shares of Microsoft Corporation.

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About the Author: Tim Phillips

Tim, based in Singapore but from Hong Kong, caught the investing bug as a teenager and is a passionate advocate of responsible long-term investing as a great way to build wealth. He has worked in various content roles at Schroders and the Motley Fool, with a focus on Asian stocks, but believes in buying great businesses – wherever they may be. In his spare time, Tim enjoys running after his two year-old son, playing football and practicing yoga.