Johnson & Johnson Can Only Get Better When It Gets Cheaper

NEW YORK (TheStreet) -- Johnson & Johnson  (JNJ) is the epitome of a great dividend-paying company for income investors. This is a company that has increased its dividend for 52 consecutive years, in this year by 6%.

As good as that looks, at the current share price of $100, the yield-to-price is only 2.8%. Shares are up 9.4% for the year to date. Since the first-quarter correction that led to the Feb. 4 low of $86.09, the stock has rebounded more than 16%. Still, the dividend yield is below 3%.

That's why the current stock market correction is a good thing for those who want to buy more Johnson & Johnson stock cheap.

Other dividend companies such as Pfizer (PFE) offer yields as high as 3.6%. One of JNJ's competitors, Swiss health products giant Novartis (NVS), has a dividend yield of 3.13% when shares are trading at $87.

Increasing both the dividend payout and authorizing large stock buybacks are common ways for companies to attract and keep income-hungry investors. Over the next eight weeks I'm expecting shares of Johnson & Johnson to trade down to its 200-day moving average share price of $97 or even lower.

As you can see in the following chart, the last time JNJ plunged well below its 50-day moving average price in February it kept falling until it penetrated the 200-day line.

JNJ Chart
data by YCharts

An investor who buys shares at $97 or less will lock in an adequate dividend yield-to-price of at least 2.89%. A thoughtful strategy would be to accumulate some shares at that price level with a back-up limit order to buy a second helping if shares fall to $94, which lifts the dividend yield to 2.98%.

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