Healthcare conglomerate Johnson & Johnson (NYSE:JNJ) is arguably the mantelpiece healthcare company all investors look up to.
With the exception of Novartis, which is currently dueling neck-and-neck with J&J for the highest market valuation among healthcare stocks, Johnson & Johnson is the unrivaled company that tends to set the tone through the sector come earnings season. As one of the largest healthcare companies, it's also looked up to by income-seekers and risk-averse investors who count on J&J's above-average dividend yield; its steady profits, which derive from its three business segments (consumer health, medical devices, and pharmaceuticals); and its lack of volatility. Johnson & Johnson shareholders get the luxury of a good night's sleep each night, which isn't something select biotech investors can attest to.
But there's so much more to Johnson & Johnson that you may not realize. Here are eight things you may not already know about J&J that could give you an even greater appreciation of the company and what it does for investors.
1. J&J consists of more than 250 subsidiaries
As I mentioned, Johnson & Johnson is built around three business segments -- a slower-growing consumer-health segment, a currently slower-growing medical-device segment that has a solid long-term outlook, and a fast-growing pharmaceutical segment. While these businesses are delivering operational growth, J&J has, throughout history, not been shy about purchasing other companies to increase its product portfolio and profitability.
In actuality, Johnson & Johnson consists of more than 250 subsidiaries among its three business segments, and it operates in more than 60 countries. With so many subsidiaries and such a diverse set of healthcare products, it's not hard to see why J&J's growth has been so steady for the past couple of decades.
2. J&J has increased its adjusted EPS for 31 straight years
Adding to the point, Johnson & Johnson has also delivered an incredible streak for its investors of growing its adjusted earnings per share, or EPS, for 31 consecutive years. By adjusted, I mean J&J strips out the one-time factors that can cause fluctuations in profits from year to year, such as currency moves, divestments, acquisitions, and one-time tax benefits, so investors can have a true apples-to-apples comparison. What this should imply to investors is that J&J's management is not only dedicated to growing the company, but that it's also incredibly efficient and competent at doing so.
3. Only six companies have a longer streak of raising their dividend than J&J
Many investors may be familiar with an elite class of just over four dozen dividend-paying stocks known as Dividend Aristocrats, which have increased their dividend for a minimum of 25 straight years. J&J is part of this elite class, but it's so much more.
Out of four-plus-dozen companies that have regularly increased their dividend for the past 25-plus years, only six companies can boast a longer continuous streak than Johnson & Johnson's current 53-year streak. And with a payout ratio of just 50%, chances are J&J has many more years of dividend increases left in its tank.
4. J&J is one of the world's largest corporate donors
As one of the world's largest companies, J&J is also regularly one of the world's largest corporate donors. Philanthropy.com notes that Johnson & Johnson gave a little more than $157 million to charity in 2013, a 20% increase from the previous year.
Specifically, Johnson & Johnson was noted for giving tens of millions of dollars to partners around the world to help research and eliminate the transmission of HIV from mother to infant, and also to help fund the development of professional healthcare workers, such as nurses and midwives, around the globe.
5. J&J has had only nine company leaders since being founded in 1886
One common sign of a great company is a cohesive management team that investors can trust -- and that's exactly what you get with J&J.
Oftentimes, the greatest companies tend to have CEOs that take the reins and hang around for extended periods. In J&J's case, the company has had just seven CEOs since it moved to the NYSE more than seven decades ago. In total, it's only had nine leaders since being founded 129 years ago! Current CEO Alex Gorsky has been with J&J or its subsidiaries for 23 of the past 27 years. This is the epitome of a cohesive management team that maintains focus.
6. It had the eighth-largest R&D budget in 2013
Researching dozens upon dozens of new drugs isn't cheap, but Johnson & Johnson is up to the task of paying exorbitant amounts of money to keep its fast-growing pharmaceutical segment churning out huge profits for investors.
According to Fortune, in 2013 Johnson & Johnson spent a whopping $8.2 billion on research and development, which was good enough for the eighth-largest R&D budget in the world. At 11.5% of its total revenue, that might sound like a lot, but it's been hard to argue with the results. Between 2009 and today, J&J brought 14 new molecular entities, or NMEs, to market, of which seven have reached blockbuster status ($1 billion-plus in annual sales). Earlier this year, J&J outlined plans to file for approval for 10 NMEs that it believes will become blockbusters by the end of the decade.
7. It also boasts one of the biggest advertising budgets in the world
In addition to spending a small fortune on R&D, Johnson & Johnson isn't shy about promoting its consumer health or pharmaceutical products.
Last year, Johnson & Johnson's annual filing listed its advertising spending at a whopping $2.6 billion, which is good enough to put it among the world's largest advertisers. J&J has the luxury of promoting its brands so aggressively because it's generated between $11.4 billion and $14.8 billion in free cash flow in each of the past nine years. With a robust advertising budget comes strong brand recognition and the potential to forge emotional connections with consumers vis-a-vis increased impressions.
8. One of only three AAA-rated publicly-traded companies
Finally, among the more than 7,100 publicly-listed companies, a mere three boast the highest "AAA" credit rating Standard & Poor's issues. Johnson & Johnson is one of those companies.
What does J&J's AAA rating imply? Only that one of the most-recognized credit agencies in the world believes that J&J has a positive long-term outlook and the tools necessary to easily manage its debt. Let me remind you that Standard & Poor's was the agency that downgraded the United States' AAA credit rating one notch to AA+ back in 2011.
Long story short, if you've been wondering why everyone is always touting Johnson & Johnson as such a great company to own over the long run, maybe these eight points will help to finally explain it.
Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.
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