A dividend is the payment that a company distributes to its shareholders as a percent of earnings. Management can decide whether to pay a dividend, how much it is, and the frequency of payments. Dividends are often distributed quarterly and are quoted as the amount of dividend per share. Companies that are growing fast tend not to issue a dividend, as they pour money back into the business.
My favorite pharmaceutical company for long-term investors is still Johnson & Johnson (JNJ), for now.
This business has managed to produce very good financial growth in recent history and its share price has appreciated exceptionally well considering this is a DOW stock, especially over the last two years.
Large-cap companies can’t avoid the business cycle and they can’t avoid industry-specific trends. For pharmaceuticals in particular, the drug development cycle can be very long-winded.
Last quarter, Johnson & Johnson produced exceptional growth in its pharmaceutical business, which is the company’s largest contributor to revenues.
But while Johnson & Johnson’s share price has done extremely well, even over the last few months, it very well could be that this company’s operating momentum is about to change.
Wall Street earnings estimates for the upcoming quarter (the company reports October 14) have been ticking higher, but total sales growth in 2015 is currently very modest. Earnings growth in 2015 is expected to improve by mid-single digits over all of 2014.
Last quarter, company management said that it would not be able to maintain the exceptional sales growth in its pharmaceutical division going forward. We may see this result in next week’s report. (See “Drop in This Company’s Stock Price Makes It Very Attractive Now.”)
On the stock market, equity securities can experience their own business cycles as investors trade in a herd mentality.
Institutional shareholders can actually get tired or bored with a particular company. Johnson & Johnson has an exceptional track record of wealth creation with capital gains combined with dividend growth.
But from 2002 to 2012, the company just traded sideways on … Read More
There’s a lot the stock market has to deal with these days, but that’s par for the course. Uncertainty, risk, and fear are basic components of equities these days. But good businesses are good businesses and NIKE, Inc. (NKE) hit a grand slam with its latest quarterly earnings.
This company’s been doing well for a number of quarters and this is a mature brand we’re talking about, not a fast-growing startup.
The momentum began before the World Cup, culminated in its previous quarter, and now, the company just produced another top-notch batch of financial results. The stock shot nine points higher on the news to a new all-time record-high.
According to NIKE, its first fiscal quarter of 2015 (ended August 31, 2014) saw total sales grow 15% to $8.0 billion. The company also owns the “Converse” label and that division’s sales grew 16% in the most recent quarter to $575 million.
NIKE has a good amount of cash on its books and the company spent $819 million buying back its own shares in its first quarter. Since September of 2012, the company has spent approximately $4.2 billion buying back its own stock at an average cost of $67.74 a share, which, as it turns out, has been a very good investment (for the company and shareholders alike). About $3.8 billion over the next two years is left in the share repurchase authorization.
As for its bottom line, NIKE’s earnings grew 23% to $962 million, or 27% on diluted earnings per share to $1.09.
One of the things that NIKE does is it comments on future orders. According to the company, … Read More
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