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The Dip in Johnson & Johnson Stock Price Is an Entry Point for Dividend Investors

Johnson & Johnson (NYSE: JNJ) stock price has been experiencing a bearish trend over the past few months. The stock price declined from 52-weeks high $148 at the beginning of the year to $129 a share at present.

JNJ Johnson & Johnson daily Stock Chart

The concerns over sluggish revenue growth impacted investor’s sentiments.

The company has generated negative revenue growth of 1% in the latest quarter. Although its consumer and pharmaceutical revenue increased slightly, its medical devices segment declined 7% year over.

The Dip in Johnson...

On the flipside, JNJ has generated robust earnings growth. This is due to its focus on investments in high margin products along with cost savings. The focus on share buybacks has also been enhancing earnings potential.

Its earnings per share increased 22% year over year in Q2 despite negative revenue growth. Its cash flow generation also remains strong enough to support dividends.

JNJ has generated $6 billion in operating cash flows during the second quarter. It’s capital investments were standing around $2.7 billion. Thus, the company was left with $3.3 billion in free cash flows. The dividend payments were standing around $2.5 billion. The gap in free cash flows and dividend payments offer a room for share buybacks.

The Dip in Johnson...

Johnson & Johnson has increased the annual dividend in the last 57 successive years. It currently offers a quarterly dividend of $0.95 per share. Its dividend growth is safe considering the huge gap in free cash flows and dividend payments.

Alex Gorsky, Chairman, and Chief Executive Officer, “Our pipelines continue to progress with the launch of new products and several regulatory submissions and approvals, which positions us well to deliver the next wave of transformational products and solutions.”

The company expects to generate sales growth of 3.2% for the full year. It expects earnings growth in the range of 4.3% to 5.5% for full year. Johnson & Johnson’s stock price is likely to bounce back in the coming days. The dip in share price is presenting a buying opportunity for dividend investors.

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Based in Saudi Arabia, Siraj has a strong understanding of and passion for accounting and finance. He has worked for international clients for many years on several projects related to the stock market, equity research and other business, accounting and finance related projects. Siraj is a published financial analyst on the world's leading websites including SeekingAlpha, TheStreet, MSN, and others.