This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Cramer's Action Alerts PLUS - See his portfolio and get alerts BEFORE every trade. Learn more NOW!

An Investor's Choice: J&J or Baxter International?

NEW YORK ( TheStreet) -- Recently I read an article about the epitome of great dividend-paying companies, and it won't surprise many that it showcased Johnson & Johnson (JNJ - Get Report).

What may surprise you is what I was reading was written back in the middle of January 2013, and the shares of JNJ were trading around $72 at that point. It referenced the fact that back then the dividend yield-to-price was nearly 3.4%.

As of Thursday, shares of JNJ hit a new 52-week high of $84.29, which drops to yield-to-price down to 2.9%. Perhaps that's why it ended the trading session lower at $83.18. Some investors are a bit queasy about getting less than a 3% dividend on what some call "The King of Dividend Growers."

Let's take a look at a one-year chart that illustrates where we have been and where we are with JNJ's stock price. This doesn't mean that JNJ isn't going to move up to $100 someday but earnings, revenue per share and the dividend itself will most likely need to go higher as well. JNJ Chart JNJ data by YCharts

It's clear from the chart above that the share price has followed the trailing 12-month revenue per share growth. As long as that revenue trajectory continues to go higher, and especially if the EPS moves in the same direction, JNJ should do just fine in the long run.

This is founded on the historical fact that this diversified purveyor of all sorts of healthcare products has raised its dividend for 50 consecutive years. Over the past 10 years the average annual increase of its dividend payout has been close to 12% per year.


Yet, we should also be prudent and note that as the dividend payout has increased so has the payout ratio. As of March 31, that payout ratio is now at 62%. For comparison one of its smaller competitors, Baxter International (BAX - Get Report), with its 2.6% current yield-to-price, has a payout ratio of 38%.

Before the U.S. markets opened on Thursday BAX announced that it achieved its first-quarter earnings and revenue expectations. The company also triumphantly confirmed its full-year guidance.

Let's focus for a minute on what BAX does to drive sales growth and EPS numbers.

1 of 3

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Try it NOW
Only $9.95
Try it NOW
14-Days Free
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
SYM TRADE IT LAST %CHG
BAX $69.21 0.00%
JNJ $102.52 0.00%
AAPL $126.41 0.00%
FB $81.21 0.00%
GOOG $575.33 0.00%

Markets

DOW 18,135.72 +38.82 0.21%
S&P 500 2,101.04 +2.51 0.12%
NASDAQ 4,982.8090 +15.6680 0.32%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs