Performance Check – JNJ

Time for a Performance Check

For some background on the idea behind the Performance Check, and the XIRR function used for the calculations, please see my first post in this series – Performance Check – PG

I’m continuing my performance check series with a look at the fifth dividend paying stock I ever purchased for my Portfolio.  The stock is Johnson & Johnson (JNJ), which is part of the Healthcare sector.

JNJ is another stock that doesn’t need much of an introduction since it’s familiar to so many, however here are some company details.  Johnson & Johnson is an American healthcare company that was founded over 120 years ago.  It operates worldwide through 3 segments: Consumer, Pharmaceutical, and Medical Devices.  From Wikipedia… the corporation includes some 250 subsidiary companies with operations in 60 countries and products sold in over 175 countries.  Most people know JNJ for their consumer products.  JNJ brands include numerous household names such as Band-Aid bandages, Tylenol medications, Johnson’s baby products, Neutrogena skin/beauty projects, and Acuvue contact lenses.

JNJ has a long history of increasing its dividend, having done so for the past 55 years (a Dividend King!), including an annual increase announced last April of 5.0%.

Just like the previous 4 stocks I reviewed, my JNJ position is one I initiated many years ago.  Thus, I have lots of data/time to factor into the return calculated in this Performance Check.

 

My Personal Performance for JNJ

My initial purchase of JNJ came at the end of Q1 1998 in a Dividend Reinvestment Plan, or DRiP, that I opened at the same time.

Below is a capture of the spreadsheet I keep with the JNJ cash flows, and the calculated XIRR.  Once again, the table is a bit long for this post due to all the entries, so I broke it up into 2 pieces, duplicating the header each time.

Here are some notes with regard to the ‘Type’ column entries:

OCP = Optional Cash Purchase;  EOY Value = End Of Year Value

Note – the prices account for a 2:1 stock split back in 2001.

The duplicate EOY Value entries at the end of each year (one negative, one positive) do not affect the cash flow, and can be thought of as boundary markers, allowing me to make the individual yearly return, and the annualized total return calculations.

 

 

You’ll notice there has been only one withdrawal over the nearly 20 years I’ve had JNJ.  This came in 2016 when I had to sell the fractional shares as a result of closing my DRiP account and transferring the shares to my brokerage account (I was only allowed to transfer whole shares).

Otherwise, it’s been only small OCPs here and there… always $100 or less, except for one contribution of ~$167.  My last OCP was in 2011.  Thus, the reinvested dividends have been doing the majority of the work.

The net investment into JNJ over the years has been $3,058.72.  This is not my cost basis though, as this net investment does not include reinvested dividends.  Reinvested dividends have been $2,244.19.  Thus, I’ve had a 73.37% payback of my net investment!

Meanwhile, the current value is $12,659.98.

The annualized total return ends up being 10.24%, covering my initial purchase on 3/30/1998, all the way through 1/12/2018.

As with PG, RPM, AFL & PEP my investment timeframe for JNJ includes two significant bear markets.

 

Summary

JNJ’s price performance in 2017 was superb at over 24%, more than 2% higher than the S&P 500.  In fact, 2017 just continues a nice price run that started in 2011, after several years of sideways movement prior to that.

This great 2017 return boosted my nearly 20-year annualized return over the 10% mark… a fabulous long-term track record.  The 10.24% annualized return for JNJ is right in my desired target return range of 9% to 11% for a company of its size.

Also, this performance is right in the middle of the reported 9.41%, 10.79%, 12.73% and 9.23% annualized returns for my Procter & Gamble (PG), RPM International (RPM), Aflac (AFL) and Pepsico (PEP) positions that I reviewed in my previous four performance checks.  These are all terrific results from a great group of stocks that have been held for a long time.

Bringing my returns for PG, RPM, AFL & PEP up-to-date allows for the following comparison.  As you can see, despite recent price changes since each individual review, JNJ still falls in the middle of the pack.

This is the 5th of the 5 performance checks I had planned.  I’m sure I’ll have more in the future, but I’ll allow for more time to pass before the next selection, as I haven’t held my remaining portfolio stocks for nearly as long.  I suspect the next performance check will be for Air Lease (AL) or Gilead Sciences (GILD).  Let me know if you have any questions about what you see in the spreadsheet snips.

Do you have similar performance checks for stocks in your portfolio?  If so, please share some of your annualized return numbers!  Let me know what criteria you have for acceptable performance.

14 thoughts on “Performance Check – JNJ

  1. Nice overview. Almost 20 years with JNJ seems like it’s paid off. That 73.37% payback of net investment is also great.

    JNJ has a wide moat; I’m only current holding one individual name, T, but we have exposure to JNJ via other funds.

    1. Hi, Mike. Oh yeah, JNJ has paid off for me. If you decide to add a 2nd individual holding, JNJ would be a good choice for your list of contenders. I think they have plenty of good years ahead of them. I plan to continue being a JNJ shareholder. Thanks for the comment.

  2. Awesome review. Never done a check like this on my portfolio. Interesting to note JNJ outperformed S&P 500. I own JNJ through my ETFs. I might look into buying some JNJ.

    1. Hi, DG. Try the calculation for one of your portfolio stocks… it’s really quite simple, especially for a single year. My data makes it look more complicated than it is due to all numbers for ~20 years.

  3. Great write up ED and congrats on the double-digit 20-year return on JNJ. I used to own JNJ, about 10 or so years ago. I participated in the stock’s DRIP. The problem I had, among other things, was paying my taxes. I had poor record management and it was difficult for me to figure how the tax. So, I eventually sold off my position in JNJ. I wish I hadn’t.

    Today, JNJ is back into my portfolio. Plus, because we are in a different time these days, the company I invest with is responsible for tracking my cost basis. Long story short, it’s much easier for me to do my taxes than before.

    JNJ is a solid stock and is well deserving of inclusion into a dividend growth investing portfolio.

    1. I agree, DP. The prospects for JNJ look as good as ever. I like that JNJ has such a stellar credit rating, and 3 different business segments to help diversify their revenue stream.

  4. Congrats on your excellent JNJ performance, ED! I love seeing these stories about long-term investment in strong dividend companies. Your experience with JNJ exemplifies why I evolved to becoming a dividend growth investor in my brokerage account. What a powerful engine for creating passive income!

    Sorry if you have answered this question in other posts – I haven’t been able to read everything on your site yet. Do you hold these in a taxable account? If so, does your analysis take into account the tax bite on the dividends each year?

    Thanks. I am looking forward to your other analyses!

    1. Hi, DF. Yes, my Portfolio is in a taxable account, and the annualized total return I presented in the post does not take into account taxes on the dividends.
      I liked the question though. I’ll have to explore some new calculations to account for the impact of taxes over the years on my return.
      For the calculations, rather than assume I sold shares to pay the taxes each year, I’d assume that the entire dividend amount was reinvested, and that tax was paid each year with cash on hand. I’d use a 15% tax on the paid dividends (assuming qualified dividends).

  5. JNJ is a great company and I have been long on JNJ for some years now. Very happy investor here. You have explained your article very well and in depth. Keep up the good work.

    Good Luck.
    TDK.

    1. Welcome, TDK. I’m glad you got to benefit from being a JNJ shareholder, too. I like JNJ’s future prospects as much as when I made my first purchase many years ago. I hope you stop by and comment again.

Leave a Reply

Your email address will not be published. Required fields are marked *