Today I'm going to tell you about a dividend stock that, within the next month, I'll be buying into with $4,000 of my own money. I'm so confident that my pick will outperform the market that if I sell any shares within the next three years, I'll donate $100 to charity.
I fully expect today's pick, Johnson & Johnson (NYS: JNJ) , to handily trounce the market because of their sheer size, diversity of products, and solid dividend.
More than just Band-Aids
Before I researched stocks, I thought the only things that Johnson & Johnson made were its signature Band-Aids and Tylenol. After digging into their filings, however, I realized that these household names were just the tip of the iceberg.
Johnson & Johnson operates in three different categories:
Consumer: This covers the aforementioned Band-Aids and Tylenol, as well as several other skin and oral-health products. The consumer division brought in $14.6 billion in total sales in 2010, accounting for about 24% of the company's total revenue.
Pharmaceutical: Medicines like Remicade (immune inflammatory diseases), Procrit (anemia), and Risperdal (anti-psychotic) number among the tongue-twisting treatments bringing in the most money for this division. Taken together, pharmaceuticals represented 36% of all 2010 revenue for the company.
Medical devices and diagnostics: Led by the DePuy franchise of knee and hip replacement products, and the Ethicon line of endo-surgery products, the medical devices category accounted for 40% of total revenues in 2010.
J&J's definitely vulnerable to disruptive competition; MAKO Surgical's (NAS: MAKO) line of knee and hip replacement devices spring first to mind. But with so many products under J&J's umbrella, growth in one area can offset a slump in another. On top of that, the company brings in so much money that it could easily buy out potential disruptors such as MAKO.
So far, my retirement portfolio (more on that later) lacks many heavy dividend payers. I've added Johnson & Johnson to add some of that exposure to my collection of 10 stocks. Here's how the company's dividend stacks up to other medical providers on a number of different metrics.
3-yr. Div. Growth Rate
Consecutive dividend increases
Johnson and Johnson
Abbott (NYS: ABT)
Novartis (NYS: NVS)
Bristol-Myers Squibb (NYS: BMY)
Merck (NYS: MRK)
Though it may lack the sexy growth rates and yields of some of its peers, Johnson and Johnson has shown its commitment to dividends, with 48 consecutive years of increases. Among the companies above, it's also using the least amount of its earnings to pay those dividends. That's exactly what I'm looking for from this spot in my portfolio.
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This is the last article in a series that I'm writing about my retirement portfolio, which I've dubbed "The Cheesehead Portfolio" in honor of my home state of Wisconsin. If you'd like to see my first nine selections for the portfolio, check them out below.
At the time thisarticle was published Fool contributorBrian Stoffeldoes not yet hold positions in any of the stocks mentioned. He will be buying $4,000 worth of Johnson & Johnson by Aug. 20. The Motley Fool owns shares of Abbott Laboratories and Johnson & Johnson.Motley Fool newsletter serviceshave recommended buying shares of MAKO Surgical, Johnson & Johnson, Novartis, and Abbott Laboratories, and creating a diagonal call position in Johnson & Johnson. Try any of our Foolish newsletter servicesfree for 30 days. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has adisclosure policy.
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