Today is the day I want to write about Johnson and Johnson ($JNJ) and why I’m holding it for the long term. One, it’s a well-established company that cranks out great products that everyone uses, and two it has amazing dividends. For each share of JNJ, you get $4.04 of dividends per year. JNJ hits all the sweet spots for building my $100,000 a year passive income portfolio. Let’s dig a bit deeper as to why.

That’s my goal, assemble a diverse group of dividend-producing individual stocks and ETF’s that each won’t make up more than 20% of my entire portfolio.

Stock Price

JNJ closed at $160.44 yesterday, which is right the green support line in my secret sauce chart generator. It had a bit of a price run because of the pending news of its single shot Covid19 vaccine coming out (hopefully to be approved by the FDA this week).

JNJ Stock Price

I also ran some Markov Analysis to see what the median average price of JNJ should be and what are the high and low price risk over 10,000 runs. Surprise, surprise! The average price of JNJ is $160.66 according to Mr. Markov.

JNJ Markov Histogram

Other interesting factoids:

  • It has a CAGR (Compounded Annual Growth Rate) of 2.12%
  • Annual Volatility of 22%
  • High price target of $373.23
  • Low price target of $65.21

I highly doubt that any of the high and low price targets will be hit but Mr. Markov calculated those levels to be within 2 standard deviations of the average.

That’s ok, I’ve been long JNJ for years and recently added to my position. It now makes up 28% of my entire dividend passive income portfolio, which is too high for me. No, I won’t sell it but I’ll add to other holdings in my portfolio to bring that percentage down to no more than 20%.

That’s my goal, assemble a diverse group of dividend-producing individual stocks and ETF’s that each won’t make up more than 20% of my entire portfolio. I do this because I want to spread my risk around.

Dividends & Fundamentals

JNJ has a relatively low dividend yield compared to my other high flyers, it’s currently at 2.48%. Normally I’d buy stocks that have a dividend yield over 3% if it’s my first time entering a position, but I’ve held onto JNJ for years and just added to it instead. JNJ pays a dividend every 3 months and the next one will be in March for $1.01 per share.

If I had 25,000 shares of JNJ - roughly $4,025,000 invested with JNJ - I’d be on target to making my $100,000 a year passive income, but c’mon! Who has a cool $4 million lying around?

JNJ dividend history

What I love about JNJ is its fundamentals, sure it has a high PE Ratio of 29.12 but it has a foward PE of 16+, its earnings are forecasted to get stronger! At $5.51 per share, its earnings are really strong.

The best part? It has a beta of 0.72, which means it’s not very volatile compared to the rest of the market. It’s a steady ship that’s sailing to my passive income destination and making me money.

JNJ fundamentals

Passive Income Risks

There are always risks with this type of investing. When you’re starting you only have a little bit of money and it’s hard to grow that into something big. I usually recommend focusing on growth stocks when you’re starting out. Find some nice trends, ride them, and get off.

When you get off with profits, then invest the profits and principal in a dividend-producing stock. Of course, you should always do this in a retirement account so you can save yourself the capital gains and dividend taxation costs at the end of the year.

Building a dividend producing passive income portfolio requires thought, time, and education. Today I’m sharing 5 tips for building a dividend passive income portfolio and how you can figure out the right strategy for you. via 5 Tips to Building a Dividend Passive Income Portfolio

The risk for JNJ is a pull back to lower prices. I admit, it has a lofty PE ratio right now and it wouldn’t meet my screen criteria right now. I’m not overly concerned with a massive price pullback because I’m holding JNJ for the long term. If it dips to $100 a share, cool! I’ll be buying more shares with my $1.01 dividend at that price and further lowering my cost average.

Of course, the other risk is your time horizon. If you don’t have a long time horizon then don’t do this type of investing. You won’t see any concrete results for at least 10 years! For me, my target is in 9 years from today when I’m legally allowed to retire and tap my IRAs.

Have a plan, keep your eye on the ball, and reclaim your time. That’s why I’m doing it, to reclaim my time!

Disclosure: Long