Source: Johnson & Johnson (NYSE:JNJ).
When investors are looking to fill out their retirement portfolios, they would be wise to give a long, hard look at Johnson & Johnson (NYSE:JNJ) stock. Though shares of the company are up almost 40% in the past year, there are three big reasons the company is worth owning today.
1. Strong brands galore
Many people might not realize it, but along with many of the products you know and love from above, Johnson & Johnson (NYSE:JNJ) also makes medical equipment and develops prescription drugs. From time to time, these two latter segments can yield major profits.
For instance, in 2012, Remicade, a product that treats Crohn’s disease and rheumatoid arthritis, achieved sales of $6.1 billion for Johnson & Johnson (NYSE:JNJ). That means almost 10% of the company’s revenues came from just one drug!
But the sales of both prescription drugs and medical devices can be volatile. The arduous drug approval process, certain medicines coming off patent protection, and continued innovation in the medical equipment industry all combine to make these segments hit-or-miss.
Therefore, although the consumer products that we are more familiar with only accounted for 21% of Johnson & Johnson (NYSE:JNJ)’s revenue in 2012, their presence is incredibly important. They provide stability for the more lucrative — but uncertain — segments of the company.
Taken as a whole, this allows investors to gain exposure to both the lucrative pharmaceutical and surgical industries just by owning Johnson & Johnson stock.
2. A very healthy balance sheet and dividend
When dealing with big conglomerates like Johnson & Johnson, it can sometimes be easy to take on debt loads or assets that aren’t shareholder friendly. For instance, during the Great Recession, other conglomerates like General Electric Company (NYSE:GE) had finance divisions that eliminated all of the cash flows generated its other divisions, causing the stock to nose-dive.
But Johnson & Johnson (NYSE:JNJ) has avoided that distinction. The company currently has $15.9 billion in debt — no small number — but holds more than $21 billion in cash. Furthermore, in 2012, Johnson & Johnson generated $12.5 billion in free cash flow — more than enough to cover the $6.6 billion in dividends the company paid out.
Currently, Johnson & Johnson (NYSE:JNJ)’s stock yields a healthy 3% dividend, much larger than the market as a whole.
3. A field ripe for continued growth
Much has been made about the skyrocketing health care costs in America. But as many fellow Fools have already pointed out, our country’s obesity, heart disease, mental health, and diabetes problems aren’t going anywhere soon.