Johnson & Johnson: Dollars and DRIPs

04/13/2015 7:00 am EST

Focus: STOCKS

David Fish

Executive Editor, Moneypaper

The sharp declines and rallies within the stock market so far in 2015 are enough to induce nausea in anyone unwise enough to follow them too closely, notes David Fish, editor of Direct Investing.

Even worse, the resulting bouts of sadness and elation are signs that a person is simply investing emotionally or committed to the role of a trader (or speculator), rather than that of a long-term investor.

The cure to this state of self-induced manic depression is a healthy dose of high-quality dividend-paying companies and a conscious decision to exercise patience and let compounding do its wonders.

If you're still in the accumulation phase, practicing a dollar-cost averaging approach should help to avoid the worry that comes with investing large sums at what could be inopportune times. In other words, the cure is all in your mind.

Founded in 1885 and listed on the NYSE since 1944, Johnson & Johnson (JNJ) is a major healthcare products company whose sales totaled $74.3 billion in 2014, with over 50% coming from foreign sources.

The company makes prescription drugs, baby care toiletries, contact lenses, surgical instruments, diagnostics, contraceptives, anti-infective products, and skincare items. Its consumer brand names include Band-Aid, Monistat, Neutrogena, Tylenol, Stayfree, and Reach.

Typically, the company spends at least 12% of its revenue on research and development. Earnings per share were $5.97 in 2014 and consensus estimates call for JNJ to earn about $6.19 per share in 2015 and $6.50 in 2016.

The annual dividend has been increased for 52 consecutive years, and now stands at $2.80 per share, providing a yield of 2.8%.

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