Johnson & Johnson faces challenges, including legal and regulatory problems, and slow growth on the highest line.
Health leader has a solid and diversified business that can overcome these winds.
J&J has increased its dividend for 62 consecutive years.
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There are hundreds of dividends on the market, but they do not offer the same level of security. Some have not increased their payments for years. Others may provide incorrect dividend increases, which will probably stop if the economic tanks or company -specific problems are hit. Others, however, have reduced their payments in recent years.
These are not the type of stocks looking for income. Instead, dividend investors want corporations that consistently raise their payments, preferably every year, and are unlikely to stop even when they face winds.
A company that has what is needed for it is Johnson & Johnson(Nyse: jnj)S That is why this long -time dividend payer is worth holding for good.
Let’s start with the “Bear” case for Johnson & Johnson. In the last few years, she has been involved in several questions. We’ll look at three.
First, he is still faced with litan of court cases related to talc -based products that have supposedly gave cancer to consumer. Recently, the company failed to put a lid on most of these lawsuits when a judge stopped its attempt to settle with most claimants. So it seems that this wind will continue.
Image source: Getty Images.
Second, the latest regulatory changes in the United States can eventually harm its revenue. US Medicare and Medicaid Services (CMS) centers already have the power to negotiate the prices of some of the medicines that Medicare spends most. The first round of negotiations includes three J&J drugs: the Blood Lord Xarelto, the Immunosuppressor Stellara, and the IMBRUVICA Birth Medication. Everyone will see a significant reduction in prices for Medicare patients.
Third, the company has dealt with relatively slow revenue growth. Nevertheless, Johnson & Johnson seems like an attractive long -term option for seeking dividends.
J&J has failed to be one of the largest health companies in the world by accident. The company is constantly developing newer and better products in its pharmaceutical and medical technological businesses. It boasts a deep range of drugs in several therapeutic areas, including immunology, oncology, infectious diseases and neuroscience. It has more than 10 medicines, each generating more than $ 1 billion in annual sales.
Its copper-technological unit is also diversified in several areas. Its pipeline has several dozen programs. And the drug manufacturer is constantly winning brand new approvals or expansion of labels. In other words, he has an incredibly strong main business that is well equipped to cope with the challenges he is facing.
Reducing prices for Xarelto, Stelara and Imbrovica will only come into force next year. And even then they will have a minimal impact on the company’s results, as none of these drugs contains in its long -term growth plans. Sales of Stelara and IMBRUVICA are already decreasing due to competitive pressure (from generic or otherwise). And while Xarelto’s revenue was moving in the right direction in the first quarter, the US Food and Drug Administration has recently approved the first generic of this medicine.
There will be more negotiations on Medicare prices and no one still knows which medicines will be directed at. But in the long run, Johnson and Johnson must be able to deal with this problem. It can avoid price negotiations by reducing its exposure to therapies for which Medicare – a program for the elderly – spends the most.
And this is just one opportunity that the deep pipeline and the company’s ability to generate constant cash flow must allow it. J&J has existed for over 100 years; He had to deal with changes in regulatory modes before.
Although the growth of the company’s revenue is slow, its recent decision to reject the consumer health department in order to focus on its biopharma and Med-tech segments, it was partly to deal with this problem. Expect higher revenue growth as it focuses more on the options for higher growth within the two remaining units.
Finally, Johnson & Johnson have a higher credit rating from the US government. Even the trial of lawsuits has not changed what is strong proof that it has the financial capacity to cope with these challenges. A previous judge recorded J&J’s attempt to settle these court cases through a bankruptcy maneuver for one of its subsidiaries, partly because the stable financial situation of the company does not put it at risk of bankruptcy, despite the court cases it is faced with.
What about dividend? Johnson & Johnson is the King of Dividend with 62 years in succession increases under his belt. The health leader should continue to go to his dividend, which now gives market yield by 3.4%for a long time.
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Proser Junior Bakiny has positions in Johnson & Johnson. Motley Fool recommends Johnson & Johnson. Motley Fool has a policy of disclosure.
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