Buy Johnson & Johnson (JNJ)?

Consider first the company’s fantastic track record of rewarding shareholders. In April, J&J provided investors with a 7% dividend increase to its current level of $2.44 per share. This marked the 50^th consecutive year of a dividend increase, an enviable dividend track record most companies would love to have.

Furthermore, Johnson & Johnson (NYSE:JNJ) is one of only four non-financial, U.S.-based companies to hold the coveted triple-A credit rating from Standard and Poor’s.

Fantastic company, not-so-fantastic price

Johnson & Johnson is simply one of the highest quality stocks in existence. It is a world-class brand with a diversified stable of products that are found in millions of households.

Furthermore, its stable business and formidable financial position mean that it will continue paying dividends, along with annual dividend increases, for years to come.

At the same time, it’s hard to make the case that the stock is a screaming bargain.

Johnson & Johnson (NYSE:JNJ) has fallen a few dollars off its recent highs, but the stock still trades for 15 times forward earnings and for nearly 4 times its book value.

There’s no denying the fact that J&J perfectly epitomizes the phrase ‘blue chip’, but it’s also true that even spectacular companies can be mediocre investments if too high a price is paid.

I would love to own Johnson & Johnson (NYSE:JNJ) stock, but can’t bring myself to buy just yet. I would consider the stock to be close to entering buy territory if it yields 3.5% or more, which at its current dividend, would be below $70 per share.

This represents a considerable downturn from the stock’s current price of $84 per share, but in today’s atmosphere of enhanced volatility, I’m content to wait on the sidelines for the market to offer a better price for J&J.

The article Should You Buy Johnson & Johnson? originally appeared on Fool.com and is written by Robert Ciura.

Robert Ciura has no position in any stocks mentioned. The Motley Fool recommends Johnson & Johnson. The Motley Fool owns shares of Johnson & Johnson. Robert is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.