- Johnson & Johnson (NYSE:JNJ) the stock is up for 2022 in a bear market
- Credit goes to its medical devices and cancer drug Darzalex
- JNJ’s dividend has been rising for six decades, making it a safe stock to own
While bears have trashed many of the biggest names in the stock market in 2022, Johnson & Johnson (NYSE:JNJ) the stock remains up for the year.
The gain is not huge, only 4%. But with the Dow down 12.7%, the S&P500 down 17.5%, and the NASDAQ down 27.3%, that’s an impressive performance.
Credit a regular dividend, with JNJ stock now yielding 2.6% after increasing its dividend every year for six decades. Credit stable results, with sales up and profits as well, on a non-GAAP basis. Also credit the company’s impending breakup, with the consumer healthcare sector splitting off.
|JNJ||Johnson & Johnson||$176.85|
Behind the strength of JNJ actions
Johnson & Johnson’s greatest strength is a drug you’ve probably never heard of unless, sadly, you or a loved one has blood cancer. This is Darzalex, which treats multiple myeloma. The drug is authorized from Genmab (NASDAQ:GMAB), a Danish company, and Johnson & Johnson pays royalties to Genmab. The drug recorded sales of more than $6 billion last year.
Patent protection for Darzalex, which is administered intravenously, extends to 2035. There is also a new subcutaneous formulation called Faspro. The drug has taken the blood cancer market by storm since its introduction in 2019.
Darzalex helps compensate for the end of patent protection for Remicade, an immunosuppressant, and Xarelto, used to treat blood clots. The company said in its first-quarter report that sales of pharmaceuticals grew 9.3% year-over-year. Sales in the medical technology division increased by 8.6%.
The problematic area is consumer health, which includes drugs like Tylenol and Imodium, sales of which grew only 1.6%.
The company is also trying to develop its talcum powder products to limit lawsuit liability, a move called “Texas two-step.” That plan is complicated by lawsuits filed by workers who say they were exposed to asbestos while making the product. The company’s baby powder has been linked to ovarian cancer and the product was discontinued in the United States in 2020.
Why Johnson & Johnson lowered its outlook
Uncertainty over the legal situation is one of the reasons Johnson & Johnson cut its outlook for 2022 when it announced its first-quarter results in April. For the year, management now expects to earn $10.15 per share to $10.35 per share on revenue of $94.8 billion to $95.8 billion.
Another reason for the lower outlook is its Covid-19 vaccine, which generated $457 million in sales during the first quarter, mostly internationally. The Johnson & Johnson vaccine is single-shot and does not require expensive storage, but is considered less reliable than mRNA vaccines created by Modern (NASDAQ:mRNA) and BioNTech (NASDAQ:BNTX), the latter being marketed by Pfizer (NYSE:DFP).
Despite Johnson & Johnson’s declining outlook, JNJ stock benefited from a “flight to safety”. That’s thanks to the dividend, which rose another 6.6% after the Q1 report. Rising dividends helped push JNJ stock to an all-time high.
The Basics of JNJ Stocks
Currently trading just below $177 per share, JNJ stock has a market capitalization of $465.4 billion. Yet the shares are trading at just 24 times earnings.
Of the 11 analysts who track the stock, according to TipRanks, six rate it a “buy” and none rate it a “sell.” Their average price target of $193.36 is 9.3% higher than the current price.
You won’t get rich by buying JNJ stock. But that won’t get you into the hospice either. Think of it as ballast, especially if you depend on your wallet for your income.
The company’s status as a “dividend aristocrat”, earned over decades, means that analysts and investors generally don’t worry about its day-to-day problems. Still, the company offers limited information about its drug pipeline, and many of its top-selling drugs will soon lose patent protection. He lost the race for the Covid-19 vaccine, and he may still have big expenses related to his talcum powder.
Therefore, I would say buy JNJ stock for the dividend, but keep an eye out for these potential issues.
As of the date of publication, Dana Blankenhorn held a long-standing position with MRNA. The opinions expressed in this article are those of the author, subject to InvestorPlace.com Publication guidelines.