A blue-chip pick for all long-term investors

With reliable earnings and dividends, this stalwart is a AAA-rated play in health care.

By TheStockAdvisors Apr 23, 2012 10:31AM
By Ian Wyatt, Top Stock Insights

Johnson & Johnson (JNJ), a model of durability, was founded in 1886. Today it is the world's largest supplier of medical devices, sixth-largest consumer health company and eighth-largest pharmaceutical company.

Johnson & Johnson has proved to be a fantastic company over the years. More importantly, it operates in a market that is only going to grow over the next several years. Shares of Johnson & Johnson have flown consistently higher since 1944. Even in just the past 20 years, the stock has climbed 713% -- from $8 to $65.

More importantly, the shares held their value well during 2008. Although they declined from about $60 to $45 that year, by December 2009 the stock was back near $60. The shares cracked $65 to reach an all-time high in 2011.

In 1972, management instituted a policy of increasing the company's dividends annually by 10% to 19%. Since the policy agreement, it has increased payments at an annual rate of more than 15%.

Johnson & Johnson also kept its generous cash dividend program intact amid the credit crisis. In fact, Johnson went one step further by increasing its dividend payout.

A long history of reliable earnings and a healthy dividend earned Johnson & Johnson something only three other U.S. companies have: the AAA rating.

Agencies give the coveted AAA rating only to companies that can virtually assure their creditworthiness. This means AAA companies pay their debts.

The AAA rating is no small compliment. Warren Buffett's Berkshire Hathaway is not AAA. Apple is not AAA. Even the U.S. government is not AAA.

What's more interesting is that the highest rate the U.S. government is willing to pay its debt investors is 3.13% (30-year Treasury). Johnson & Johnson pays its current shareholders 3.6% annually.

Despite the huge run-up in stocks this year, JNJ stock has stayed flat. The lack of attention Wall Street traders have given it could work to our advantage.

Now is a great time to own a reliable, stable and necessary company. Johnson & Johnson is a stalwart blue chip, one that every long-term investor should consider for his or her retirement portfolio.

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