Daily Gains Letter

Where to Find Certainty in the Stock Market with Cyprus on the Edge

By for Daily Gains Letter |

270313_DL_clarkThere are a lot of great stocks out there with proven track records for making money. These are retirement stocks—brand-name stocks that pay dividends to create wealth. With dividend reinvestment, you can effectively compound this wealth in an easy, costless manner.

One blue chip company that I’d like to highlight is Johnson & Johnson (NYSE/JNJ), which has an outstanding track record of increasing its dividends to shareholders and achieving capital gains on the stock market.

I couldn’t get data for before 1972, but Johnson & Johnson has increased its annual dividends every year since then. Since 1972, the company’s stock has split three-for-one on two occasions, and two-for-one on four occasions. The company’s last share split was on June 12, 2001, and the stock is definitely due for another split.

On the stock market, Johnson & Johnson recently spiked 10 points higher. And that’s just since the beginning of January. The company’s long-term stock chart is featured below:

dl_0327_image001Chart courtesy of www.StockCharts.com

Track record-wise, the stock is up well over 10-fold within the last 20 years, and that’s just capital gains; that doesn’t include dividends paid.

Everyone knows Johnson & Johnson’s consumer products; the company’s baby shampoo is for sale virtually everywhere. But Johnson & Johnson is much more than that. It’s dozens of popular healthcare brands, skin creams, and medicines. The company’s pharmaceutical research in oncology, contraceptives, immunology, and vaccines is extensive. Finally, Johnson & Johnson manufactures implants, diabetes care products, and joint replacement products. It’s a company with hugely favorable exposure to demographic changes and an aging population.

Of course, this is why Johnson & Johnson is rarely down for long on the stock market. Institutional investors love those consistently increasing dividends.

Even the most successful companies experience periods of non-performance on the stock market. Dividends are a cushion to keep investors interested, but they also keep shareholders from losing out to price inflation.

The stock market is at a very critical juncture this year. The recovery bull market has run its course and a new business cycle is about to unfold.

The biggest near-term risk is, of course, the instability in the eurozone. Even with the Dow Jones Industrial Average at a record high, investor sentiment has a fragility to it that can’t get past the sovereign debt problems in Europe.

On the next large stock market retreat, companies like Johnson & Johnson that pay increasing dividends will be worth adding to for long-term investors. Even though retirement plans for a lot of people have changed, the aging population will favor the healthcare sector. In fact, it already does.

Dividends are key to saving for retirement and everyday portfolios. There is more certainty in Johnson & Johnson’s regular quarterly dividends than there is in just about anything else.

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