Key Points
Market downturns can be challenging for investors to navigate. But one way to get through them is to own shares of companies that can perform relatively well even when the going gets rough. In that regard, Johnson & Johnson (NYSE: JNJ), a healthcare leader, is a strong option.
Here are two reasons that I’d hold its shares through any market crash.
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1. It’s a diversified healthcare giant
Healthcare is a defensive industry that’s somewhat protected from economic fluctuations. If a market crash occurs due to challenging economic conditions, investors can rest assured that a healthcare giant like Johnson & Johnson will still deliver relatively stable financial results. After all, patients won’t want to stop taking life-saving cancer (or other) medicines, nor will physicians stop prescribing them.
J&J’s drugs span oncology, immunology, infectious diseases, neuroscience, and other areas. It’s also worth noting that patients only pay part of the cost of its medicines, while the rest is covered by insurers. Beyond its pharmaceutical segment, the company has a large medical device business where it markets products across several therapeutic areas.
Johnson & Johnson’s deep and diversified portfolio, as well as its entrenched position in the healthcare sector, are among the key reasons its revenue and earnings have grown steadily for decades. And the next market crash — or the one after that — is unlikely to change that.
2. The dividend matters
Total returns include both price appreciation and dividends. When a company’s stock price drops during a market crash but it continues to pay and increase its dividend, that helps smooth out market losses. Of course, this only works for companies that don’t suspend their payouts when the going gets rough, and the evidence strongly suggests that Johnson & Johnson is one such payer.
The healthcare specialist is a Dividend King — a corporation with at least 50 consecutive years of payout increases (J&J’s streak is 63 straight years). It has increased its dividend through many market and economic downturns, and will likely continue doing so. That’s another great reason to hold the stock through any market crash.
Now, Johnson & Johnson isn’t for everyone. It isn’t a leader in artificial intelligence (AI), and its top-line growth is usually not eye-popping. Investors looking for high-growth stocks might want to pass on this company. However, its leadership in healthcare, strong underlying business, and excellent dividend program make it a stabilizing force and a quiet long-term compounder.
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Prosper Junior Bakiny has positions in Johnson & Johnson. The Motley Fool recommends Johnson & Johnson. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
