Johnson & Johnson (JNJ): Is This Healthcare Company a Strong Investment?

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The main concerns will revolve the pharmaceutical and medical devices segments. In regards to the pharmaceutical segment, the company is likely to maintain its growth in this segment. The company’s progress in the treatment of Hepatitis C is keeping analysts optimistic regarding J&J maintaining its growth in sales in the future.

Dividend and buyback

Johnson & Johnson (NYSE:JNJ) repurchased more than $10 billion of shares in 2012. The company also paid back nearly $3.6 billion of its debt. J&J wasn’t the only one: Both P&G and Eli Lilly repurchased their own stock in the past year. P&G repurchased its stock and at the same time expanded its debt. Considering the low interest rates the company has to pay, and considering the high dividend yield the company pays, this maneuver could save the company millions in dividend payments.

This year, however, J&J issued $1.1 billion worth of stocks. If the company will continue to issue stocks, it will lower the company’s earnings per share ratio, which is something worth noticing.

In terms of dividend, the above companies offer reasonable yields that range from 3.08% for P&G to 3.77% for Eli Lilly. J&J is, again, in the middle of the pack at nearly 3.1%. This is another key advantage for holding these stocks.

Financial stability

The company’s financial situation remains stable as it continues to maintain a very low debt-to-equity ratio that reached in the first quarter of 2013 only 0.23. In comparison, P&G’s ratio is 0.48; Eli Lilly’s, 0.36. The low financial risk of J&J is another advantage for holding this company.

The bottom line

The company’s financial stability, reasonable dividend yield and steady growth make J&J an interesting investment. If the stock market will continue to dwindle and in the process will drag along with it Johnson & Johnson (NYSE:JNJ), this could only benefit investors who consider purchasing this profitable and sustainable company. Nonetheless, currency risks, decline in profitability and slowdown in consumer segment growth could impede this company’s progress in the near future.

Lior Cohen has no position in any stocks mentioned. The Motley Fool recommends Johnson & Johnson and Procter & Gamble. The Motley Fool owns shares of Johnson & Johnson.

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