Johnson & Johnson (JNJ - Get Report) has been in the news a lot lately, and mostly, for all of the wrong reasons. Most recently, the company was front and center in the Oklahoma opioid case where the company was ordered to pay $572 million for its involvement in helping to fuel the opioid crisis in that state.

Immediately after this verdict was announced, the stock popped some 4% because the $500 million penalty was much smaller than many expected. But that strength didn't last and Johnson & Johnson shares have once again sunk back below the $130 level because analysts are starting to fear the long-term repercussions of the company's decision to fight in court rather than settle like many of the other pharmaceutical names ended up doing.

Johnson & Johnson has appealed what it believes to be a flawed decision and it seems as if these court battles for the company will never end (remember, that J&J is also facing numerous cases regarding its talcum powder and the role of alleged asbestos causing cancer in consumers). Oklahoma is just one state, and a relatively small one at that, so if Johnson & Johnson ultimately loses this decision, the company's opioid liabilities could end up being significant.

Yet, could this litigation related noise surrounding the stock be presenting a buying opportunity for long-term shareholders? The company's underlying fundamentals appear to say so.   

Attractive Valuation

After recent weakness, Johnson & Johnson shares have fallen to the 15.2x level in terms of a trailing twelve-month price-to-earnings ratio. This is essentially the support level that the stock bounced off of during the Christmas Eve sell-off in late 2018, as well as the earlier sell-off we saw last year when the crypto-bubble popped. You have to go back to 2013 to find the stock breaking down below this 15x threshold for any meaningful amount of time.

On a forward looking basis, Johnson & Johnson is even cheaper. During its recent second quarter earnings report management updated guidance which involved expectations for full-year non-GAAP EPS landing somewhere in the $8.53-$8.63 range. This represents nearly 5% growth compared to 2018's non-GAAP EPS total of $8.18.

Shares are currently trading for 14.8x the mid-point of this 2019 guidance. And, looking further ahead, analysts are estimating that Johnson & Johnson produces $9.16 in 2020 and $9.77 in 2021. Shares are currently trading for roughly 14x the 2020 consensus and 13.1x the 2021 estimate.

Johnson & Johnson's earnings growth trajectory today is in-line with historical growth during the last decade. Both of these consensus estimates that we see for 2020 and 2021 represent 7% annual growth. This means that a relative discount is not warranted on a price-to-earnings growth basis.

A High Dividend Yield in a Low-Rate Environment

Furthermore, in a low rate environment, it becomes even more difficult for me to ignore Johnson & Johnson's 3% yield and the tremendous balance sheet and cash flows that support it. J&J has generated almost $18.4 billion of free cash flows during the trailing twelve months and boasts one of only two AAA credit ratings in the world (Microsoft (MSFT - Get Report) has the other).  

U.S. bond yields are essentially at record lows. The 10-year bond yields just 1.5% and the 30-year treasury note yields only 2%. Relatively speaking, the yields on U.S. government paper remain strong considering that there are trillions of dollars' worth of sovereign debt providing negative yields world-wide. However, these Treasury notes still remain weak compared to certain equity dividends provided by defensive companies like Johnson & Johnson.

It's important to note that any dividend can be cut. That's the risk that income-oriented investors face in the equity space. Yet, Johnson & Johnson offers one of the reliable yields in the equity space with a payout ratio of less than 50% and an annual consecutive dividend increase streak of 57 years.

Litigation certainly produces risk for equity holders here, yet when J&J's dividend yield is roughly twice that of the U.S. 10-year bond and 50% more than the U.S. 30-year's, this reliably compounding dividend nearly becomes a no-brainer.

Ignore the Noise

Obviously all of these guidance numbers and analyst estimates go out the window if the company loses big in the courtroom regarding its opioid and/or its talc-powder issues. However, at this point in time, attempting to predict the outcome of those issues is purely speculative. Being swayed by all of the fearful noise created by these concerns could result in investors missing out on a chance to buy this blue chip dividend aristocrat at valuations rarely seen.

Johnson & Johnson and Microsoft are holdings in Jim Cramer's Action Alerts PLUS Charitable Trust Portfolio. Want to be alerted before Cramer buys or sells these stocks? Learn more now.

Nicholas Ward is long JNJ and MSFT.