Best Stock for 2009: Johnson & Johnson

Which stocks are looking fine in ’09? Discover all our Foolish ideas for The Best Stocks for 2009.

What stock can I recommend to you for 2009? Well, I feel like I should really take 2008 into account. It's a year that has traumatized many investors, leaving them feeling queasy at the thought of putting much more of their money in any stock. So I want to suggest a stock that should let you sleep well at night: Johnson & Johnson (NYSE: JNJ  ) . 

It's probably a company you've known since childhood, since your mom shook its baby powder onto your tush. Since then, I suspect, you've been a frequent user of many of its offerings -- do any of these names ring a bell? Desitin, Rogaine, Tucks, Aveeno, Lubriderm, Neosporin, BenGay, Purell, Listerine, Efferdent, e.p.t., Benadryl, Nicorette, Rolaids, Sudafed, Visine, Stayfree, Reach, Mylanta, Motrin, Imodium, Band-Aid, Acuvue, K-Y, Lactaid, Neutrogena, Monistat, Tylenol, and Splenda. (Whew!)

Odds are, even your mom and grandma remember the company from their childhood. It's been around since 1886! Think about that: 1886 was the year that Coca-Cola was invented, and that the Statue of Liberty was dedicated. It was the year that Geronimo surrendered, and that Emily Dickinson died. In short, it's an old company, one we can expect to stick around through all of 2009, and well beyond.

If you're skittish about stocks, you should look for consistent performers. Consider these stats, from Johnson & Johnson's website. As of the end of 2007, the company had:

  • 75 consecutive years of sales increases.
  • 24 consecutive years of adjusted earnings increases.
  • 46 consecutive years of dividend increases.

In addition, the stock had a 10-year 140% total return for investors, compared to a 51% total return for the S&P 500.

That's powerful stuff. The company's dividend yield has recently been around 3.3%, which is rather ample, especially when compared to paltry alternatives such as bank account interest rates and even CDs. Sure, you might find some CDs paying 3% or 4%, but they won't offer potential stock price appreciation, and their rates are fixed. (Dividend-paying stocks offer an easy way to double your returns.) 

After J&J hiked its dividend for 46 years in a row, do you have any doubt that it aims to do so again in 2009? I don't. (That's one reason I'm a shareholder, though my dividends are bigger than yours.) Over the same decade as above, its dividends have risen at an annual average of more than 14%, which is rather healthy.

The company is one of the few "Dividend Aristocrats," S&P analyst-rated four- or five-star companies that have hiked their dividends for at least 25 consecutive years. Some others are:

Company

Recent dividend yield

3M (NYSE: MMM  )

3.6%

Abbott Labs (NYSE: ABT  )

2.8%

Archer-Daniels-Midland (NYSE: ADM  )

2.0%

Coca-Cola (NYSE: KO  )

3.4%

Consolidated Edison (NYSE: ED  )

6.0%

State Street (NYSE: STT  )

2.6%

Source: Standard & Poor's, Yahoo! Finance.

Johnson & Johnson is known for savvy acquisitions, and it buys competitors regularly. It also invests heavily in research and development, and those investments can pay off in blockbuster products.

More reasons to cuddle up with J&J
Need I go on? Well, I'm happy to. It's focused on three powerful industries: consumer products, pharmaceuticals, and medical devices. Given our nation's current and aging demographics, these seem like dependable and growing spaces in which to operate. There will probably be more surgeries in the future. More people will need medications (J&J already markets more than 100 of them). More people will need Tylenol, Band-Aids, and Visine. The company already rakes in more than $12 billion in free cash flow -- and that should rise, over time, boosting the stock price.

Share your thoughts!
I'm not the only J&J fan. In our Motley Fool CAPS stock-rating community, more than 10,000 participants -- 96% of all those rating the company -- have predicted that it will outperform the market. And 98% of our All-Star predictors weighing in feel the same way. Participant Swizzled quipped back in May 2006, "It's all I can do to not put all of my money into [Johnson & Johnson] and go nap on the couch for 25 years."

Click on over to see what else your fellow Foolish investors are saying about J&J in our free CAPS community, and share your own thoughts.

Longtime Fool contributor Selena Maranjian owns shares of Johnson & Johnson, Coca-Cola, and 3M. Johnson & Johnson is a Motley Fool Income Investor selection. 3M and Coca-Cola are Inside Value recommendations. Try our investing newsletters free for 30 days. The Motley Fool is Fools writing for Fools.


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  • Report this Comment On December 18, 2008, at 5:48 PM, fish4uinmd wrote:

    not to mention their cash...how many smaller companies are they invested in?? anyone know?

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