Then and Now – Johnson & Johnson
Welcome to another Then and Now post, a continuation of my series where I revisit some older blogposts and either rip them to shreds (because my thinking has changed on such subjects) or I’ll confirm my position on various personal finance topics or specific investments.
You can check out my previous posts in this series here:
Today’s post is about a U.S. dividend paying stock I’ve owned for many years: Johnson & Johnson (JNJ:US).
- I started writing about JNJ here – some eight-plus years ago. These were the very early days of this blog.
- In early 2009, I was transitioning out of big bank mutual funds and I started looking at various U.S. dividend paying stocks to buy and hold. I found the dividend history of Johnson & Johnson (among other U.S. dividend aristocrats) very appealing.
- At the time, I recall JNJ was priced around $55 per share – so I bought A BUNCH. Their dividend was $0.49 per quarter.
- Based on the historical juicy dividends delivered by this company, I believed JNJ along with a few other healthcare stocks would make a great home in my Registered Retirement Savings Plan (RRSP). This is because I could not only reinvest all the dividends paid by JNJ tax-deferred, I could also avoid withholding taxes on U.S. stocks if I kept such U.S. stocks (or even U.S. ETFs for that matter) inside my RRSP (vs. a TFSA, vs. a non-registered taxable account, other). You can read more about where I invest based on asset location here.
- I also bought JNJ because I found many broad funds including ETFs own this stock as one of their core holdings. I figured if this large-cap stock was good enough for all the major U.S. mutual funds and ETFs, it was good enough for me to own directly.
- Lastly, I decided to buy JNJ because like other Canadian stocks I own (e.g., BCE, BMO, BNS, ENB and more…) I wanted to participate in the potential capital growth and future dividend raises this stock might deliver. I also wanted more U.S. exposure.
- JNJ was the very first U.S. stock I owned – I’ve owned it since 2009.
- At the time of this post, JNJ is trading at about $130 USD per share. Effectively, the stock price has doubled since I bought it just over seven years ago.
- At the time of this post, JNJ pays a dividend of about $0.84 USD per share. The dividend has increased about 70% in the last seven years.
Short-term and long-term, I have no intention to sell this stock. I will continue to buy and hold Johnson & Johnson for the foreseeable future. I will continue to reinvest all the dividends paid every quarter. (I’m currently DRIPping one share per quarter to buy more JNJ stock commission-free.)
I’m optimistic our basket of U.S. stocks inside our RRSPs will continue to grow. Growth from JNJ and other stocks should provide a nice retirement nest egg when coupled with this major dividend income goal from the Canadian stocks we own.
Time will tell!
What are your thoughts about my approach to buy and hold JNJ? What are some of your favourite U.S. stocks to own? Thanks for reading and sharing.
With this very recent dip are any of you plan on loading up? JnJ is at a 52 week low. 2015 levels.
I currently DRIP one share per quarter and wish to deploy capital into new stocks that I don’t yet own. Also keeping a bit of cash, just in case, a major correction occurs. So, no, not “backing up the truck” per se but happily DRIPping my JNJ share. You?
No individual stocks are not my cup of tea. For dividend, dividend growth or value investors JnJ should look very attractive right now. I’m shocked no one who commented on this thread isn’t backing up the truck. If you own a stock, but you don’t buy more when it goes on sale what is the point of owning an individual stock and doing all the research that comes with owning that individual stock?
Fair point…but I am buying more stock just via my DRIP in it – so basically, it’s like a total return stock.
The reason I’m not buying that stock or any particular stock right now is my cash fund is low in my RRSP and I want to build it back up to $5,000 or so. Once it’s there, I will potentially go shopping again. I don’t wish to buy often since I wish to keep my transaction costs per year low (under $100 if I can).
JNJ is one of the best buy and hold dividend stocks out there. Healthcare is a growing sector, and JNJ has very solid dividends.
It is a growing sector for sure. It will be interesting to see any consolidation that happens over time.
Recently started following your blog, love the content Mark!
Just a small note that the link to your then and now Bell Canada doesn’t work, I had to find it the good old fashioned way.
Thanks Dave! Good to know, fixed…give it a try here!
” 3.32 / 69 = 48%”
Now I’m a grade twelve dropout but even I know that math ain’t correct.
@Lloyd to get the percentage you multiply by 100
You should have stayed in school:)
3,32 /69 * 100
Hope that helps
ummm…no. Care to try again.
@ Lloyd OK I’ll play what do you get
Seriously? Use a calculator and enter the numbers you posted. I’ll wait.
The current dividend yield of the stock is $3.32 / $69 (original price paid) * 100 = 4.8% (yield on his investment)
$69 (price paid) / $132 (current price) * 100 = 52%
The YoC (yield on cost) of his original investment has grew 52%
Okay, the math is now correct but I don’t know what the heck you’re saying with the rest of the post as you are using prices only to try to come up with some kind of a change in yield.
Assuming the provided numbers are correct (I did not check):
YoC at the time of the original purchase was 1.80/69 = 2.6%
YoC currently is 3.32/69 = 4.8%
Ergo, the YoC went from 2.6% to 4.8%. So if one is trying to show how much the YoC has gone up, the formula becomes (4.8-2.6)/2.6 = 84%.
It’s just a way to compare the current yield on the stock – 2.57% to the investor’s actual yield on the purchase price, which in this case is really – 4.8%. This is a mostly overlooked comparison because most investors get fixated on the current yield. It doesn’t tell the whole story though.
Yes you are right his YoC is in fact 84%. He received $180 in dividends in 2009 and now $332 in 2017. He’s receiving 84% more in dividends than when he purchased his position.
Thanks for your help clearing up my poor use of numbers, ratios and my calculator:) Cheers!
JNJ was a great buy in 2009 and I understand why you’re still holding it probably forever.
You bought it for $69 and it’s now $132. That’s a 90% rise in growth.
It paid $1.80 in dividends in 2009. It now pays $3.32. That is also a 90% increase in DG. That’s 9% compounded annually.
The best part is and why I love the DG strategy is that on your original $69 you have collected $2,426.00 in dividends, based on a 100sh purchase..
The YoC (yield on cost) of your investment is 3.32 / 69 = 48% – meaning you have received almost half your investment back in dividends alone. This is why holding long term wins.
The current yield is now 3.32 / 132 = 2.5%
Growth in the stock may be slower going forward but nobody really knows anything.
The ‘T’ in ETF stands for ‘Trading’. So, by definition alone the manager has to trade stocks to justify and generate MERs. I don’t like trading my dividend growth stocks. Most ETF distributions never change. So if you look for dividend growth and yield it’s not there. If you want to build income for retirement dividend stocks are the safer bet. You get the capital growth and the income. You’re now getting $332 on your original $6900 investment with a 90% rise in growth. Fantastic!
FWIW – I’m the same Peter from years ago lol – Working on a new blog after blowing up the previous three hahaha! Take Care
MER on VOO is 0.04%, every $100,000 costs $40 at that rate, at $1,000,000 it’s $400 . Also what manager? it’s balanced by a computer hence why the fees are so low.
JNJ has trailed its own industry(healthcare) and the broader market(S&P 500). There’s no question that it’s a great investment however, but if there are better choices with less risk people should choose that. You never know if Gorsky will get caught up in something. Or the company as a whole turns into a GE or an IBM, or even a BCE. Those are great companies, but they’ve been pretty flat for a very long time.
Buying the index for 30 years and converting to dividends near/after retirement if you want retirement income is no different than buying dividends now and keeping it near/after retirement.
The only difference would be if you missed out on the growth of the broader market. Since dividend-paying stocks typically grow slower than the index (especially companies that have dividends above 1.5%) the safter bet is the index. Warren Buffet and John Bogle have been preaching about the S&P being the best way to build wealth for the past 20 years. It blows my mind that no one listens to them.
See chart below comparing JNJ, IBM, XLV, GE, BCE and VOO
Had to use SPY to go back far enough. XLV (Healthcare ETF) did quite a bit better than JNJ. S&P not far behind
Omg still the incorrect chart. User error……
XLV is impressive. Thoughts if the future returns will be as good. Potentially with an aging population right? MER = 0.13%; great.
@Brett: Each to their own. If etf’s are you choice great and I certainly don’t have a problem with that. For me I’m 100% equities, no bonds, etf’s mutuals, preferred or gic’s. I don’t say it’s for everyone, but as we’ve being investing for over 20 years and a good portion of that trying to grow the pile, unsuccessfully, till we discover DG. Now we 76 and fully retired, collecting much more in dividends than our annual expenses and are not worried whether there is a market crash, correction or if it stays stagnet. How many Passive investors can say the same?
Well done cannew but I think you know it’s really hard for most investors to earn the income you do 🙂 I hope I get halfway there with my dividend portfolio! Indexing and focusing on total returns is a great way for many investors to invest – better than many (higher-cost, lower-return) alternatives as you know.
That is the way my friend, good for you. Continued success!
I’ll be there soon enough, 5 more years, 7 if there’s a major correction. Then I’ll convert a chunk of the portfolio to dividend payers. I also have 4 rentals (and a prime residence) andI intend to unload one of them on my wife’s next matt leave to lessen the cap gains taxes and de risk our real estate holdings. Rising interest rates and all…
I’m in the growth phase still but will definitely move to something more passive in a bit.
I came from poverty and set my 20-year financial plan at age 20. Turning 39 this year and I’m 1 year ahead of those goals. I wish I had’ve found vanguard funds in my 20s, I would have been done a couple years ago….Oh well, we all learn a bit on the fly.
I hope I’m never in a position where I need to own bonds. Would be nice just to let things grow for the next generation(s)
Wow, well done…”came from poverty and set my 20-year financial plan at age 20. Turning 39 this year and I’m 1 year ahead of those goals.”
I hear about investing and knowing about indexing in my 20s!
Curious, why hold all those liabilities in rental incomes? Why not sell and be closer to retirement?
2 were lived in and refinanced to buy the next property which i live in now. The hedge in me wants to keep them because of the stock market gets obliterated when these mortgages are paid off it will gross around 50k in income, i’d just have to work until they’re paid off which is another 15 years or so. The much more logical side of me would like to sell them. I’m trying to minimize cap gains taxes in the progress and mortgage fees for closing them out before the term is up. I also kinda wanna keep the one condo which is near the waterfront (Toronto) and my kid(s) can have it if he goes to university in Toronto. Lots of what if’s…I will likely sell one a year as they come up for renewal. Condo’s are booming even more right now because all the people who could afford an entry-level house in Toronto have been pushed back into the condo market due to new restrictions on mortgage qualifications. The other 2 properties are smaller properties in the London area, 1 a student rental.
It is a lot of leverage, a bit more than I’m comfortable with, but my debt to net worth is under 1 and my debt to equity is under 0.5 which is better than most households in Canada. Of course with a housing correction on the horizon, those numbers could change quickly. It’s something i think about for sure hence why I think i will slowly unload them. But then again, it makes up the entire dividend portion of my portfolio, it’s just much less tax efficient. Debating putting them under a corporation to reduce the taxes.
As you can see I’m not entirely sure what i should do with them…thoughts?
I could absolutely see keeping one condo (near waterfront) – that should always appreciate in value. It just seems like a lot of RE exposure and I’m more conservative – already tried and let go of landlord dreams. We did it for a few years and now own REITs instead. Same RE exposure (and more with industrial and commerical properties that I could never own on my own) and a LOT less headaches.
If you mean putting your dividends (non-reg) under your corporation, that’s a good idea. I know of a few investors who have long since maxed out RRSPs, TFSAs, RESPs (they are doing very well financially…) and they’ve decided to run a small side-biz; incorporate and thus put dividend paying stocks inside that corporation for the lower dividend tax hit.
Just some perspectives – that’s all! Good luck with your decision. Sounds like you have lots on the go.
VOO has been a star over the last 10-years. Same with VTI. VYM has been stellar as well. $10,000 invested in any one of those ETFs would now be worth between $24k and almost $29k respectively now.
My wife and I plan to retire or at least semi-retire in 10 years and there is no way in telling whether those equity returns will be as good. So, we hybrid invest using a blend of dividend paying stocks and ETFs for that reason. Is this the right call? Time will tell! This means I don’t have 30 years to just index invest and hope for long-term capital gains.
It’s been a good stock Peter – good to hear from you.
The YoC metric is something I don’t really worry about. Rather, I focus on the income my portfolio generates today since that’s all I can spend.
“Traded” in the Exchange Traded Fund is something investors should be mindful of.
JNJ in my portfolio is currently churning out about $600 USD per year, buying 4 new JNJ shares each year. Will it always be this way? I don’t know but I suspect JNJ will continue to excel.
XLV paid out a measly $770 in dividends for that same period 2009 (when purchased) -2017 on the same 100 shares in the example.
JNJ paid out $2,426 during the same period in one stock. Diversification via an ETF is not that safe, it’s a myth actually.
It is Y + DG = Total Yield. .
Right now XLV after MER pays out a yield of 1.36%
JNJ @ 2.57% almost double the annual yield and returned more than $1,656 back to investors than XLV during the same period.
The math doesn’t lie, we all have to pick our poison. The other thing to keep in mind is stock splits. When they happen we benefit. ETFs you won’t see the profit that comes with that. Plus it’s just more fun isn’t it?
I like JNJ for long-term holding. I have seen it as a core holding for the past decade. It has worked well for me.
It’s been good for me and as long as they continue to pay a dividend and increase it, I will own it.
J&J is one of the great stocks demonstrating the real advantages of DG investing. Everyone wanting to buy a US stock should include J&J to their list of holdings, hold, buy on dips, hold & repeat. Why would anyone want an etf, with many stocks, some you don’t want and where the distributions don’t go directly to you. Pick a group like J&J and buy those, reinvest the dividends and hold them in your rrsp.
“Why would anyone want an etf”
I can see a person just starting out who does not have the assets to pick up these individual stocks in sufficient numbers to make it a their investment strategy. If I was just starting out in investing, I’d be using the TD e-series (or any other ETF/index fund with no purchase fees and low MERs) as a monthly purchase plan until enough assets were accumulated to make individual stock ownership viable. I’m too lazy to do all the work of buying a share from a bunch of different companies and going the stock transfer route. It’s certainly a viable alternative, but it would be too much work for me.
Why would anyone want the risk of an individual stock? In our lifetime we’ve seen huge “amazing” companies completely fail. I put amazing in quotes because at the peak right before collapse they were amazing. It’s happening right now in the UK with Steinhoff International. They were like the size of walmart but due to fraud they’re almost out of business. Enron outpaced the S&P for 10 years straight before it collapsed and it was also the largest company in the world. GE hasn’t been affected by fraud but it’s done nothing for its investors over the last 10 years. If you’ve been invested long enough then you know that at any given time any stock can collapse and never come back. What happens of Bezos gets caught up in the ‘me too’ scandal? For those who have been invested over 20+ years this is common knowledge. Blackberry, Nortel, etc the list goes on….
If you like the US dividend payers why not pick up VYM, with dividends reinvested it’s done just as good as VOO and the risk of owning VYM over JNJ is night and day…..If JnJ took 7 years to double it’s trailed VOO cause the last double of the stock market only took 5 years or so.
To be properly diversified you need a bare minimum of 15 stocks, but realistically it should be more like 20-25. If anyone of those stocks get wiped out it’s still a sizable chunk gone forever (4-6%). If anyone of those stocks gets wiped off of VYM or VOO you won’t even notice it….It will also get replaced by an up and comer pretty quick.
“Buying the dips” is a poor strategy mathematically, “buying asap” is the best long-term strategy. With individual stocks you can’t avoid the transaction fees whereas buying ETFs with Questrade is 100% free of charge, so you can buy every quarter or even every paycheck and avoid all fees.
JNJ has also trailed the healthcare industry (XLV) so not only has it trailed the index, it had a tailwind because of the healthcare boom and it’s trailed that as well. Higher risk profile (one stock) and trailing it’s industry and the broader index. Do this 15 – 25 times with the different stocks in your portfolio and over 25 years there could be a great miss on returns.
So the question is why wouldn’t you want an etf? If you can truly pick stocks that outpace their industry and the broader index then many people will pay you millions of dollars to manage their money for them, and you’ll get to charge 2 and 20 and then boom, you’re part of the problem :), but also rich….
I don’t look at just one U.S. stock at trying to beat the index, I look at my portfolio as a whole. Long-term, if I can get 7% or so total return without paying large money management fees to do so – that’s great. It would be very difficult for just one stock (to cherry pick) to beat the index.
I don’t really want to manage other people’s money. A fee-only-advisor eventually as part time job, maybe!
You raise some great points Brett. I happen to own VYM actually, a few hundred shares and if you include my wife’s portion close to 1,000 shares.
I likely always will for the reasons you’ve mentioned. BTW – Nortel never paid a dividend from I recall and if folks “bet the farm” on Nortel or Blackberry or Amazon or Enron, well shame on them 🙂
I own 32 Canadian stocks and 10 U.S. stocks + VYM. I think if banks and telcos and healthcare and infrastructure companies and more all go down, we’re all doomed 🙂
Further thoughts? Open to comments.
Reinvesting those and others (PG, T, VZ, etc.). I will continue to do so!
Are you buying JnJ on this dip? It’s down to 2015 levels currently.