Johnson & Johnson Is a Stock to Buy and Hold Forever
One of the best healthcare companies in the industry, Johnson & Johnson (NYSE:JNJ), is recently in the news after its Covid-19 vaccine received an emergency authorization in the U.S. The company is now set to deliver 100 million doses by the end of June. JNJ stock may not have had the best couple of years, but there is a lot going right for the company right now. The stock could soar to new highs this year due to the vaccine boost, and it is already up 11.4% over the past year.
The approval of the vaccine shows that the company has the technological capability to innovate. With more vaccines, there will be higher revenue. I am bullish on the stock, and I think investors should buy and hold it forever. Here’s a look at the drivers that make the investment case for JNJ stock.
Potential of High Revenue Growth
After the emergency authorization for the use of its single-shot vaccine, Johnson & Johnson stated that it has four million doses that are ready for the market and that it will have another 20 million by the end of March. Further, the company expects to meet the U.S. commitment of 100 million by the end of June.
What sets the vaccine above the two other injections from Pfizer (NYSE:PFE) and Moderna (NASDAQ:MRNA) is the use of adenovirus that teaches your immune system to identify the virus that causes Covid-19. The vaccine has a 100% efficiency against hospitalization and death. Besides the United States, JNJ has also been granted an approval from Canada and Bahrain. As a result, Canada has already ordered 10 million doses of the vaccine. Since the vaccine does not require extremely low temperatures for storage and is a single shot, it will be much easier to distribute in remote areas of Canada.
Several companies have been unable to achieve success in the development of a vaccine. The innovation and execution by JNJ is something one should absolutely make note of. Interestingly, Johnson & Johnson will sell the vaccine at the cost price during the pandemic. This will certainly drive the revenue of the company above expectations, even if it does not make any profit on the vaccine. Clearly, the revenue in 2021 will be on the upside.
With the approval of the vaccine, the process of vaccination will speed up since it is a single-shot vaccine and has a validity of two years. JNJ continues to remain an integral part of the pharmaceutical industry when it comes to dealing with the novel coronavirus crisis.
Top Dividend Stock
Investors who are looking to stock up their portfolio with dividend stocks should be equally interested in JNJ stock. Johnson & Johnson announced a cash divided of $1.01 for Q1 2021. It enjoys a strong dividend yield of 2.5%, which is higher than the S&P 500’s dividend yield of 1.52%. The industry dividend yield stands at 2.37%, and the current annualized dividend of the company is 1.5% higher than 2019.
Specifically, Johnson & Johnson increased its dividend five times over the last five years on a year-over-year basis. The average annual increase of the dividend is 6.12%. The company has consistently increased the quarterly payouts for 58 years in a row, making it a true dividend aristocrat. The future dividend payout will be based on the earnings of the company. The company has a payout ratio of nearly 50%, and looking at the prospects of the company, it is expected that there will be solid growth in revenue.
Wall Street is also bullish on the stock. Out of 11 analysts on TipRanks, 10 have a buy rating and 1 has a hold rating on the stock. Additionally, they have given it an average target price of $189.90.
The Bottom Line on JNJ Stock
JNJ stock is a buy for several reasons. It is a pure dividend stock with strong growth prospects. Additionally, pharmaceuticals is its major growth driver and will take the stock to new heights in 2021. The approval of the vaccine could give a good boost to the company in the short term, but the long-term prospects look even better given its innovation and technological advances in the industry.
Johnson & Johnson stock is one to buy and hold forever.
On the date of publication, Vandita Jadeja did not have (either directly or indirectly) any positions in the securities mentioned in this article.