Johnson and Johnson Valuation Conclusion

The paper seeks to conduct a dividend analysis and stock valuation for Johnson and Johnson company. While the company has been paying dividends quarterly, the table below gives the annual dividends and the annual growth rate recorded for the past 10 years. These values will help to assess the average growth rate and afterward value the stock price.
Table 6
Johnson and Johnson’s Annual Dividends
Johnson and Johnson Dividend Per Share Annual Growth Rate
Oct-20 $ 3.98 6.13%
Oct-19 $ 3.75 5.93%
Oct-18 $ 3.54 6.63%
Oct-17 $ 3.32 5.40%
Oct-16 $ 3.15 6.78%
Oct-15 $ 2.95 6.88%
Oct-14 $ 2.76 6.56%
Oct-13 $ 2.59 7.92%
Oct-12 $ 2.40 6.67%
Oct-11 $ 2.25 6.64%
Oct-10 $ 2.11
Note. Adapted from Johnson and Johnson, 2021.
Johnson and Johnson’s average dividend growth rate for the last 10 years is 6.55%. The average growth rate for the 5 years is 6.17%, while the average growth rate for the last 3 years is 6.23%. For the past 10 years, Johnson and Johnson’s annual dividend growth rate has been on the rise where it recorded the lowest rate of 5.40% in 2017 and the highest rate of 7.92% in 2013 (“Dividend History | Johnson & Johnson”, 2021). It was also noted that there was a consistent improvement from 6.64% in 2011 to 7.92% in 2013 but then declined slightly to 7.92% in 2014. It then increased to 6.88% in 2015 and then started to decline again to 6.78% in 2016. Then a major drop was recorded in 2017, where it declined to 5.40%, the lowest growth rate over the 10-year period. It then increased again in 2019 but declined in 2019 and then increased in 2020. Over the 10 years, the growth rate has been fluctuating.
In this case, based on Johnson and Johnson’s dividend growth over the 10 years, I chose 7% as the high-end growth rate. I also selected 4% as the low-end growth rate.
Part 2 Preliminary Valuation
The constant growth method was used to determine Johnson and Johnson’s stock price as follows;
Price =
Where;
D is the most recent dividend paid by the company
g is the dividend growth rate
r is the discount rate

Using the formula above, we begin by calculating Johnson and Johnson’s stock price at 4%, the low-end growth rate. Here, since Johnson and Johnson is a large capitalization company, we will use 10% as the discount rate, and the calculations are as follows;
Price =
Price =
Price =
Price = $68.99
Based on the calculations above, Johnson and Johnson’s stock price is $68.99
In the second step, we use the constant growth method to compute and Johnson’s stock price at 7%, the high-end growth rate. Here, since Johnson and Johnson is a large capitalization company, we will use 10% as the discount rate, and the calculations are as follows;

Price =
Price =
Price =
Price = $141.95
Based on the calculations above, Johnson and Johnson’s stock price is $141.95. Currently, Johnson and Johnson’s stock price is at $170.96 (“Johnson & Johnson (JNJ) | Yahoo Finance”, 2021). this means that both the stock price at the low-end growth rate and the high-end growth rate were below the current market price. The disparity thus means that Johnson and Johnson’s stock price is overvalued.
Therefore, based on the two calculations, we can conclude that Johnson and Johnson’s stock price is $141.95, at the high-end growth rate. However, this is lower than the current mart price, which stands at $170.96, meaning that Johnson and Johnson’s stock price is overvalued.

Get 20% Discount on This Paper
Pages (550 words)
Approximate price: -

Try it now!

Get 20% Discount on This Paper

We'll send you the first draft for approval by at
Total price:
$0.00

How it works?

Follow these simple steps to get your paper done

Place your order

Fill in the order form and provide all details of your assignment.

Proceed with the payment

Choose the payment system that suits you most.

Receive the final file

Once your paper is ready, we will email it to you.

Our Services

Quality Custom Writers has assembled a team of highly skilled writers with diverse experience in the online writing circles. Our aim is to become a one stop shop for all your Academic/ online writing. Check out below our amazing service!

Essays

Essay Writing Services

At Quality Custom Writers, we prioritize on all aspects that creates a good grade such as impeccable grammar, proper structure, zero-plagiarism, and conformance to guidelines. The principal purpose of essay writing is to present the author's evaluation concerning a singular subject about which they have made. Since Professionalism is the mother of every success, try our team of experienced writers in helping you complete your essays and other assignments.

Admissions

Admission Papers

You have been trying to join that prestigious institution you long yearned for, but the hurdle of an admission essay has become a stumbling block. We have your back, with our proven team that has gained invaluable experience over time, your chance of joining that institution is now! Just let us work on that essay.How do you write an admission essay? How do you begin the essay? For answers, try Quality Custom Writers Now!

Editing

Editing and Proofreading

Regardless of whether you're pleased with your composing abilities, it's never an impractical notion to have a second eye go through your work. The best editing services leaves no mistake untouched. We recognize the stuff needed to polish up a writing; as a component of our editing and proofreading, we'll change and refine your write up to guarantee it's amazing, and blunder free. Our group of expert editors will examine your work, giving an impeccable touch of English while ensuring your punctuation and sentence structures are top-notch.

Coursework

Technical papers

We pride ourselves in having a team of clinical writers. The stringent and rigorous vetting process ensures that only the best persons for job. We hire qualified PhD and MA writers only. We equally offer our team of writers bonuses and incentives to motivate their working spirit in terms of delivering original, unique, and informative content. They are our resources drawn from diverse fields. Therefore your technical paper is in the right hands. Every paper is assessed and only the writers with the technical know-how in that field get to work on it.

Coursework

College Essay Writing

If all along you have been looking for a trustworthy college essay service provider that provides superb academic papers at reasonable prices, then be glad that you search has ended with us. We are your best choice! Get high-quality college essay writing from our magnificent team of knowledgeable and dedicated writers right now!

Coursework

Quality Assignment/Homework Help

We give the students premium quality assignments, without alarming them with plagiarism and referencing issues. We ensure that the assignments stick to the rules given by the tutors. We are specific about the deadlines you give us. We assure you that you will get your papers well in advance, knowing that you will review and return it if there are any changes, which should be incorporated.

× How can I help you?