Contrarian Value Ideas

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>>> Johnson & Johnson - Another quality business with a long track record of regularly hiking its dividends is healthcare staple Johnson & Johnson (NYSE: JNJ).

https://finance.yahoo.com/news/2-magnificent-p-500-dividend-082500784.html

J&J's stock price is down 19% from its early 2022 high. Part of that dip can be attributed to concerns regarding legal liabilities related to lawsuits involving its talc products. J&J is making efforts to resolve this (hopefully) short-term headwind. The dip can also partly be attributed to concerns about J&J's growth outlook for the next few years, when it will lose patent exclusivity on some of its pharmaceutical products, opening the door for other companies to make generic versions, which will put a drag on sales. But Wall Street is undervaluing the company's track record for developing new pharmaceuticals that can pick up the slack and drive further growth.

Johnson & Johnson has a long history of innovation. It has steadily increased its research and development budget for years, spending over $15 billion on it last year alone. The company is constantly investing in its pipeline of new treatments and technologies that will keep the company growing, as it has for over a century. In fact, products that were introduced within the last five years made up a quarter of J&J's total revenue last year.

It's a quality business in large part due to management's history of achieving high returns on capital. In addition to its product pipeline, management is always looking for opportunities to make strategic acquisitions that expand its capabilities in high-growth areas of healthcare, including its medical technology segment. It just completed its acquisition of Shockwave Medical, extending its presence in the high-growth market for cardiovascular intervention devices.

Johnson & Johnson's profitable business has funded a growing dividend for over 60 years. It recently raised the quarterly payment by $0.05 per share, bringing its forward dividend yield at the current share price to 3.32%.

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