Johnson & Johnson (JNJ -0.46%) has been dealing with tens of thousands of lawsuits related to its talc products, which plaintiffs allege gave them cancer. There is nothing unusual about a company the size of Johnson & Johnson dealing with some legal issues.

But the sheer number and nature of the company's lawsuits, combined with some plaintiffs accusing the drugmaker of knowing the dangers associated with its talc products but ignoring them to make a buck, have been damaging to the company's image.

Fortunately, Johnson & Johnson seems to be moving closer to putting this major risk in the rearview mirror. Let's discuss what that could mean for investors.

A favorable settlement?

On April 4, Johnson & Johnson announced that its subsidiary, LTL Management, was offering $8.9 billion to settle all lawsuits related to its talc products. That's significantly more than the $2 billion the company had previously offered. The $8.9 billion will be payable over 25 years and, as Johnson & Johnson emphasized, will not be an admission of wrongdoing.

The company also says that more than 60,000 concerned parties are backing the settlement under these terms.

Settling would let the pharmaceutical giant avoid spending more time and money defending itself in court and potentially being declared responsible for the damage its talc products have allegedly caused. And although $8.9 billion sounds like a lot of money, in the grand scheme of things, it isn't, not for a company of Johnson & Johnson's size. Last year, the drugmaker had revenue of $94.9 billion, a 1.3% increase year over year.

Johnson & Johnson's net profit declined by 14.1% for the year to $17.9 billion. So the $8.9 billion for this settlement would represent just under 50% of the net income Johnson & Johnson reported last year. Of course, it would be better for shareholders if the company didn't have to pay this amount at all, but it also would not be a particularly damaging settlement amount.

The bigger picture 

Although this proposed settlement is good news for Johnson & Johnson, there are many reasons to consider investing in the company regardless of these new developments. Johnson & Johnson is a Dividend King. It is on a fantastic run of 60 consecutive years of dividend increases. And the company's business is strong enough to sustain many more hikes, even with the talc-related lawsuits it is facing.

Johnson & Johnson's long list of products includes more than a dozen blockbuster medicines that generate over $1 billion in annual sales. The company's pipeline boasts 109 programs that routinely lead to new approvals and indications. The drugmaker also has a medical device business that could grab onto the exciting and fast-growing robotic-assisted surgery market thanks to its Ottava robot system.

Johnson & Johnson is spinning off its consumer health unit, a transaction that will decrease diversification but boost revenue growth. Despite all this, Johnson & Johnson's stock had struggled, partly due to issues related to the talc lawsuits. Maybe that's why its shares climbed once the company announced the $8.9 billion settlement, though they still are down about 10% in the past year.

Johnson & Johnson could remain vulnerable in the short run, with a still-challenging economic environment that might weigh on the company's financial results the way it did last year (for example, currency exchange rate fluctuations took a bite out of Johnson & Johnson's revenue growth). But for long-term investors, now is an excellent time to initiate a position in Johnson & Johnson.

The company is moving to put one of its biggest risks -- which was damaging to its image -- to bed thanks to this settlement. The spin off its consumer health unit will have a positive affect on the business's growth rate, and the economy will recover eventually. That will lead to stronger top- and bottom-line growth, higher payouts, and Johnson & Johnson remaining a leader in healthcare for years to come.

Investors should stay put with this pharmaceutical stock.