For many investors, this has shaped up to be one of the most challenging years on record. Since hitting their respective all-time highs between mid-November and the first week of January, the broad-based S&P 500, celebrated Dow Jones Industrial Average, and growth-focused Nasdaq Composite have all plunged into bear market territory (i.e., a minimum decline of 20% from a recent high).

Although bear markets can be scary due to the velocity and unpredictability of their moves lower, historically, they've always been an opportunity for patient investors to put their money to work. Throughout history, every single double-digit percentage decline in the major U.S. stock indexes has been wiped away by a bull market rally. The only thing needed for this to happen is time.

Time has been an ally of individual stock investors, too. Just ask the longtime shareholders of healthcare conglomerate Johnson & Johnson (JNJ 0.23%).

A pediatrician using a stethoscope to listen to a child's lungs.

Image source: Getty Images.

If you had bought Johnson & Johnson on its debut day, you'd be rich now

Johnson & Johnson, or J&J for short, was founded 136 years ago by three brothers (Robert Johnson, Edward Johnson, and James Johnson) who'd worked in the medical products industry. However, it wasn't until September 24, 1944, that J&J would make its debut as a publicly traded company on the New York Stock Exchange.

At the end of September 1944, the 30-component Dow Jones Industrial Average closed at 146.73, courtesy of data provided by S&P Global. Since then, through last week's closing value of 29,634.83, the Dow has increased by 20,097%! That's about a 7% annualized return over the past 78 years.

While a nearly 20,100% return sounds (and is) phenomenal, it'd be peanuts compared to what Johnson & Johnson has delivered over the same timeframe.

When J&J went public on Sept. 24, 1944, its initial public offering (IPO) price was $37.50 per share. This would have allowed an investor with $1,000 in cash to purchase 26 shares, not including commission costs or fractional shares. However, J&J has had 12 separate events since its IPO (stock splits and stock dividends) that would have impacted this original share count.

The number in the parentheses adjacent to each event shows the progression of shares owned by this hypothetical IPO investor since inception and has been rounded down to the nearest whole number in instances where fractional shares were produced:

  • May 5, 1947: 100% stock dividend (52 shares)
  • Nov. 15, 1948: 5% stock dividend (54 shares)
  • Nov. 15, 1949: 5% stock dividend (56 shares)
  • March 20, 1951: 5% stock dividend (58 shares)
  • Jan. 9, 1959: 2.5-for-1 stock split (145 shares)
  • June 19, 1967: 200% stock dividend (435 shares)
  • May 15, 1970: 3-for-1 stock split (1,305 shares)
  • May 18, 1981: 3-for-1 stock split (3,915 shares)
  • May 10, 1989: 2-for-1 stock split (7,830 shares)
  • June 9, 1992: 2-for-1 stock split (15,660 shares)
  • June 11, 1996: 2-for-1 stock split (31,320 shares)
  • June 12, 2001: 2-for-1 stock split (62,640 shares)

Over 78 years, a patient investor's initial 26-share purchase of Johnson & Johnson would now total a whopping 62,640 shares. More importantly, with J&J ending last week at $164.46, a 62,640-share position would equate to $10,301,774 in value. For those of you keeping score at home, that's a gain of 1,030,077% and a compound annual growth rate of around 12.6%.

Keep in mind this figure doesn't include the monetary dividends J&J has paid its shareholders for decades.

Here's how Johnson & Johnson became one of Wall Street's top-performing stocks

As you can rightly guess, stock valuations don't rise by more than 1,000,000% by accident. There is a laundry of list of reasons that have helped Johnson & Johnson make its very-long-term investors millionaires.

On a macro basis, J&J has benefited from healthcare being a highly defensive sector. No matter how poorly the U.S. economy or stock market performs, people don't stop getting sick or requiring prescription drugs, medical devices, and healthcare services just because Wall Street had a bad day. This provides a steady level of demand for healthcare stocks, big and small.

On a more company-specific basis, J&J's not-so-secret formula for success involves management continuity, its operating structure, its juicy capital return program, and its pristine credit quality.

In terms of the former, J&J has had just 10 CEOs in its entire 136-year history. Having little turnover at the head of the table has led to the seamless implementation of strategic initiatives and operating shifts throughout the decades. In other words, don't overlook the importance of having a strong and tenured management team.

A person looking at a prescription bottle from their medicine cabinet.

Image source: Getty Images.

Secondly, as I've previously pointed out, J&J's operating model is designed like a puzzle that fits together perfectly. Currently, the company generates most of its sales growth and operating margin from its pharmaceutical segment. Over the past decade, more of J&J's revenue has shifted to higher-margin drug sales.

However, brand-name therapeutics offer a finite period of sales exclusivity, which leaves J&J's revenue stream exposed to generic competition. To counter these patent cliffs, the company leans on its other operating channels. For instance, the company's leading medical-device segment is growing slowly at the moment but is perfectly positioned to take advantage of an aging domestic and global population whose access to preventative care is expanding.

Wall Street professionals and everyday investors have also fallen in love with Johnson & Johnson's capital return program. Over the past nine years, J&J has repurchased more than $53 billion worth of its common stock. Arguably even more impressive, the company is riding a 60-year streak of increasing its base annual payout. Only a small handful of publicly traded companies can boast a longer active streak.

Finally, Johnson & Johnson's credit quality is truly something to marvel at. Of the thousands of publicly traded stocks in the U.S., Standard & Poor's (S&P), a division of S&P Global, has assigned its highest credit rating (AAA) to just two -- Johnson & Johnson is one. Put another way, S&P has more faith that J&J will service and repay its outstanding debts than it does the U.S. federal government (AA rating) doing the same.

Johnson & Johnson may not be the growth story it was throughout the 1980s and 1990s, but its arrow continues to point skyward for both sales and profits. There's no reason to believe that long-term investors won't continue to be rewarded for their patience.