Can JNJ Stock Keep on Its Current Growth Track?

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Johnson & Johnson (NYSE:JNJ) is giving investors a case study for trading on the news. The normally placid dividend stock has been volatile over the last two years. Most of that is due to the ongoing lawsuits that embroil the company.

Can JNJ Stock Keep on Its Current Growth Track?
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To summarize, the company currently is a defendant in thousands of lawsuits from people who claim that the company’s baby powder products caused them to develop cancer, particularly ovarian cancer. In 2018, Johnson & Johnson paid $4.7 billion to 22 women. And in 2019, an Oklahoma judge ordered J&J to pay nearly $600 million for its role in the state’s opioid crisis.

But Johnson & Johnson has been remarkably resilient. And recently the company has had two positive news stories that are boosting JNJ stock. First, the company posted a solid, albeit not spectacular, earnings report. Next, the company announced that it’s on the forefront of developing a vaccine for the coronavirus. This has provided a catalyst needed for the stock to climb over 5% since the beginning of the year.

Don’t Put Too Much Hope in a Vaccine

On the heels of a mixed earnings report, JNJ stock got a boost from reports that it is one of the companies on the front line for developing a vaccine for the coronavirus. This is encouraging news for all the countries, particularly China, that are trying to contain the virus.

Johnson & Johnson’s chief scientific officer, Dr. Paul Stoffels, announced the company’s work on the vaccine. According to Stoffels, J&J is confident that its team of scientists would be able to achieve a breakthrough result. Although the team has only been working since the onset of the virus, Stoffels expects the company to have an update within the next few weeks.

But investors need to be realistic. It may be months before the vaccine makes it through all the rigorous steps needed to bring the vaccine to market. In fact, by Stoffels’ own admission, it could be a year before the vaccine is available.

Johnson & Johnson Is More Than Baby Powder

Brand Finance recently released its annual assessment of global pharma names. Despite not being known as a pure play in the pharmaceutical sector, Johnson & Johnson was ranked as the most valuable pharma company for 2020. The company is currently worth $10.9 billion.

This was particularly significant because, as Brand Finance reported, J&J saw an 11% decline in brand value. This was mostly due to the ongoing legal issues that surround the company. But according to Richard Haigh, managing director at Brand Finance, this just shows the strength of the company.

“By having a strong brand, J&J is more resilient. You do see scandals with big brands, but it takes quite a few before things really start to go off the boil,” he said. “I think J&J is still a very well-loved and respected and trusted brand despite some of these issues.”

But Is This a Case of Mistaken Identity?

Over the last 10 years, JNJ stock has been providing a respectable annual total return. The stock has had an annual total return of around 12.5% (with dividends reinvested) and just over 11% (without dividends reinvested).

And that’s an important point to remember. The stock is up right around 12% for the last 12 months. In 2020 alone, JNJ stock is up a little over 5%. My point in saying this is that, while Johnson & Johnson is seeing a sizable portion of its revenue come from pharmaceuticals, it is, at its core, a defensive stock.

Remember, a primary attribute that makes JNJ stock attractive is its dividend. The company is one of only 28 dividend kings. These are companies with a history of increasing its dividend for at least 50 years. Heading into 2020, JNJ is at 57 years and counting. There is some concern about the company’s ability to continue raising the dividend in light of the unknown cost of legal judgments. However, many analysts remain unconcerned.

Is JNJ Stock a Buy?

For the right investor, JNJ stock is a buy. The company, and its stock, is poised to do well even if the market becomes more volatile, as InvestorPlace’s Vince Martin speculates. However, its ability to pay the dividend is still the reason why I would consider J&J. If you’re looking for growth, you may be in for disappointment.

As of this writing, Chris Markoch did not hold a position in any of the aforementioned securities.

Chris Markoch is a freelance financial copywriter who has been covering the market for over five years. He has been writing for InvestorPlace since 2019.


Article printed from InvestorPlace Media, https://investorplace.com/2020/02/can-jnj-stock-keep-growing/.

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