Not that JNJ is a "cheap stock." It's trading at a forward PE of 15 but its PEG ratio is a much more reasonable 2.55. It pays an annual dividend of $2.64, representing a payout ratio of about 55%.
What finally motivated me to go long JNJ was the news Friday that the company is considering selling its diagnostics division. I just love it when the parts are worth spinning off.
Our two previously mentioned research monarchs, whose Action Alert PLUS I subscribe to and read regularly, opined on this juicy bit of news. They wrote that JNJ's management "...could find ways to create shareholder value, believing the consumer business could be spun out.
"We still believe this to be the case, but we are pleasantly surprised to hear that it is considering other options for businesses that are underperforming."What Link and Cramer meant was the Ortho Clinical Diagnostics unit, which makes blood-screening devices and tests, could be sold for as much as $5 billion (EBITA for this unit is $450 million) and will be marketed to private-equity firms worldwide. This won't happen anytime soon, but they viewed the news as "... a clear positive, and it is the reason we will build this position further." If you want to know how many shares the duo bought for Cramer's charitable trust, you'll need to subscribe to
Check Out Our Best Services for Investors
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Model portfolio
- Stocks trading below $10
- Intraday trade alerts