Johnson & Johnson and UnitedHealth Take Down the Dow


Although we don't believe in timing the market or panicking over daily movements, we do like to keep an eye on market changes -- just in case they're material to our investing thesis.

The Dow Jones Industrial Average has gotten off to a slow start to kick off the new week as stocks have wobbled all day long. As of 2:25 p.m. EDT, the Dow is stuck near breakeven. Health care stocks around the Dow are partly to blame for the malaise: Johnson & Johnson has lost around 0.7%, while UnitedHealth Group has fallen by about 1.1% on the day, with each ranking near the bottom of the blue-chip index. Let's catch up on what you need to know.

Looking to UnitedHealth's future
UnitedHealth's poor post-earnings performance continues. The stock lost more than 7.4% overall last week in a horrible showing that made it the worst Dow stock of the week. Investor uncertainty remains hanging around over UnitedHealth's nebulous prediction that 2014's earnings could come in above or below this year's. Now, however, more eyes are focusing on the effects Obamacare's tepid rollout could have on insurers in the near future.

The law hasn't worked out as planned. Technological glitches and scams cropping up have hampered the health care reform's launch, although the Department of Health and Human Services did announce over the weekend that it is bringing in as much technical help as possible to combat the issues with enrollment. Still, will it be enough to help offset the waning public image of Obamacare's launch?

Fortunately, UnitedHealth is one of the better-suited players in the industry for Obamacare, no matter whether it succeeds or flops in the coming months. The company limited its exposure to many states' insurance exchanges, and UnitedHealth has done a fantastic job growing revenue recently before the launch of the new law. The company -- and the insurance industry as a whole -- might take a big hit from Obamacare if the law fails to bring down insurance costs and sign up the 7 million new Americans the administration set as a goal, but UnitedHealth has plenty of breathing room to operate under. In the insurance industry, it's a top pick for any long-term investor.

Johnson & Johnson's the same sort of long-term pick for anyone's portfolio, and no real negative news sparked today's fall. The stock has had a slow past six months, however, gaining only about 8% despite year-to-date gains of about 29%.

JNJ Chart
JNJ Chart

JNJ data by YCharts.

Nonetheless, the company's recent earnings results that showed strong growth out of its pharmaceutical division should reinforce your faith in this dividend investor's dream stock. Johnson & Johnson's 2.9% dividend yield isn't the highest among health care's top stocks, but the stock is a dividend aristocrat -- i.e., it has raised its dividend every year for at least the past 25 years. It also sports a manageable 55% payout ratio, which is lower than some of big pharma's best dividend-payers. With a bountiful pipeline and strong drug sales only looking to surge higher, Johnson & Johnson's future looks as bright as ever.

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Fool contributor Dan Carroll has no position in any stocks mentioned. The Motley Fool recommends Johnson & Johnson and UnitedHealth Group. The Motley Fool owns shares of Johnson & Johnson. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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Originally published