Johnson & Johnson (JNJ) is expected to grow cash flow and dividend in the mid-to-high single digits, with analysts believing the company has a solid pharmaceutical pipeline with enough diversification to weather hits to its portfolio, says David Abella, Senior Portfolio Manager at Rochdale Investment Management.
“Johnson & Johnson is a bread-and-butter stock for any large value portfolio. At 16 times earnings, it’s a bit of premium to pharmaceutical stocks, but it’s cheaper than, say, a consumer staple name like Procter & Gamble (PG) at 19 times earnings. It has a great medical device business. The dividend is very, very solid, 3% but growing 7% over the past five years,” Abella said.
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Abella says JNJ represent a stable company within his investment portfolio thanks to its growth prospects and involvement in different industries, and he adds the company is a leader in the medical device space, which trades at a higher multiple than pharmaceuticals.
“When you sum up the pharmaceutical business, the medical device business and then the consumer product business, which is a solid business in and of itself, you end up with a true blue-chip, steady company, and one that we feel can be a stable performer, with defensive characteristics, or in baseball terms, hopefully a solid base hit — and in this market, trying to get to a solid base hit is pretty important,” Abella said.