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
JNJ
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%.

If you liked this article you might like

Roku, Nucana and Other IPOs That Should Be on Your Radar in 2017

Some of Trump's NFL Owner Friends Side With Players in Dispute With President

The Best Companies for Women

Crazy Weak U.S. Dollar Will Make These 10 Companies Huge Winners

Cramer: Goldman's Downgrade Of J&J Is 'Questionable'