When we look back on stock growth stories that tell of gargantuan returns, there are typically only a few people who had the foresight to invest at the beginning and reap the full benefits of a stock's multibagger growth. Most of us use terms like "coulda, shoulda, woulda" as we detail a dream scenario in which a small investment can make us a millionaire several times over.
Still, companies with a long history like Johnson & Johnson (JNJ -0.04%) can offer a justifiable investment and produce gains that allow investors to at least double their money. Let's take a look at the pharmaceutical company's more recent past to see what an initial $10,000 investment a decade ago would shape up to today.
A change at the helm
In 2012, CEO Bill Weldon had led Johnson & Johnson for ten years but had proven unsuccessful in raising the stock price beyond the mid-$60 range, where it had hovered for most of his tenure. Amid backlash from how the company handled numerous over-the-counter drug recalls, Weldon resigned in April 2012 after a particularly tumultuous two-year period. He was replaced by the head of pharmaceuticals in the Europe, Middle East, and Africa (EMEA) region, Alex Gorsky.
The decision to bring in Gorsky proved effective for the company and its investors: Since Gorsky took charge, Johnson & Johnson's stock has shot up by 176%. After navigating the company through the coronavirus pandemic, Gorsky transitioned to Executive Chairman, passing the CEO role onto Joaquin Duato in January.
Tested by a pandemic, the company stands strong
In 2018, J&J stock hit a peak of $147, which lasted for two years. Then, shares took a short-lived tumble of 21% along with the broader market amid uncertainties around the COVID-19 pandemic. But as the pandemic raged on, specialized medical products became imperative.
Johnson & Johnson developed a vaccine, designed a specialty ventilator that could assist two patients at once, donated $3.7 million in personal protective gear to frontline workers, and took care of its own employees through one-time monetary rewards.
Such efforts have been repeated throughout the company's history; that responsibility has helped J&J to stand the test of time. It remains one of the best-known healthcare companies today and a top healthcare stock for investors.
The value of your initial $10,000 today
If you had invested $10,000 in 2012, it would've bought you 147 shares of the company's stock. J&J's share price has grown from its stagnated mid-$60 level in that year to around $175 today. Ten years later, the value of that initial investment would be over $31,000, accounting for a total return of 212%.
Notably, $4,100 of that return would have come from dividends. Johnson & Johnson has increased its dividend for 59 consecutive years, with an average annual growth rate of 6.4% and an average yield of 2.8%. This places the company in the elite status of Dividend King.
What will take it higher?
2022 is kicking off what could be another 10-year growth spurt, but with a bit of uncertainty. Although recent earnings missed Wall Street estimates, sales in pharmaceuticals and medical devices both rose 6% in the first quarter. Slowing COVID cases is allowing for the rescheduling of once-postponed medical procedures, and care facilities are again looking to bolster products and devices that will support rising demand.
The company also announced that it is spinning off the consumer health business, which saw a slight 1.5% decline in sales during the quarter. The spinoff will allow the company to focus its investments on stronger revenue generators, which should continue to grow in a post-pandemic environment.
Amid slowing COVID treatment revenue and macroeconomic headwinds like inflation and supply chain bottleneck, Johnson & Johnson has lowered its guidance for total 2022 revenue by $1 billion, meaning year-over-year growth is likely to be flat. On the good side, investors should like the 6% increase in annual dividends, which would keep in line with the historical average.
J&J's name recognition, increasing dividends, and a focus on higher-revenue operations should make it a solid investment that could more than double your money once again over the next 10 years.