I find it interesting that BV/Share and the dividend have grown at the same rate for the past decade
What does value investing really mean? Q1 2021 hedge fund letters, conferences and more Some investors might argue value investing means buying stocks trading at a discount to net asset value or book value. This is the sort of value investing Benjamin Graham pioneered in the early 1920s and 1930s. Other investors might argue value Read More
Johnson & Johnson (NYSE:JNJ) was over-priced in 2002, but today it finally looks worthwhile. Market psychology took ~10yrs to washout to get to this level as one can see from the Pr/BV trend in the chart.
Here is my analysis on JNJ. You have 2 return streams, 1) %Div and 2) Gwth Rate of BV/Shr. For JNJ the BV/Shr Gwth has been 11% since 2002, but what you receive depends on the Pr/BV ratio at which you buy it.
In 2002 JNJ was priced at 7x BV and the 11% BV Grwth Rate becomes 1.57% while the DIV was 1.54% for a total return of just over 3%. The stock did has not had great performance since 2002 as the Pr/BV dropped to the recent just below 3x BV even though the growth was quite steady.
At 3x BV you get 3.67% BV Growth and today you get 3.6% DIV for a total 7.25%+. This is good today in a 4.9% Prevailing Rate climate. JNJ has grown its dividends at the same pace as its BV/Shr the past 10yrs.
I would buy JNJ in today’s market.