Johnson & Johnson Analysis

November 12, 2015

Jack Wendland

Company overview

The world’s largest and most diverse healthcare company,1 Johnson & Johnson

(JNJ) is frequently divided into three fields: pharmaceuticals, medical devices, and

consumer goods.2 To some extent, this simplistic trifurcation undermines the

organizational complexity of JNJ, a healthcare behemoth made up of more than 265

companies located in 60 countries.3

The first of these three fields, pharmaceuticals generated $32.3 billion in sales in

2014, 43.5% of annual sales. JNJ further divides its pharmaceutical products into five

more concentrated areas: immunology, oncology, neuroscience, infectious diseases,

and a catch-all other. JNJ’s best-selling pharmaceutical at the moment is Remicade,

which is used in the treatment of arthritis. While Remicade did represent roughly a fifth

of its 2014 pharmaceutical sales, all in all, JNJ’s pharmaceuticals segment is varied.4

The second field, medical devices accounted for $27.5 billion in sales in 2014,

37% of annual sales. Again, this segment can be further broken down into more concise

groupings: orthopedics, surgical care, vision care, cardiovascular care, and diabetes

care.5 The diversity of products in this field is arguably even greater than that of

pharmaceuticals, which, though prescribed to treat a number of maladies, are all

ingested more or less the same way.

The final field, consumer goods brought in $14.5 billion in sales in 2014, 19.5% of

annual sales. Subdivisions exist among consumer goods as well: skin care, baby care,

oral care, wound care, and over-the-counter drugs.6 Unlike in the case of

pharmaceuticals and medical devices, consumer goods are, as made self-evident by

their name, distributed directly to consumers. For this reason, familiarity with JNJ’s

consumer-goods brands (which include Band-Aid, Tylenol, Benadryl, Sudafed, Zyrtec,

Neutrogena, Lubriderm, and Aveeno) is incredibly high among the hoi polloi.

A global healthcare institution incorporated in 1887, JNJ has managed to stave

off any sclerosis that might strike a company of its age and size by making the

development of new products its primary objective for all three of its operational

segments. In 2014 alone, JNJ poured an impressive $8.5 billion, 11.4% of annual sales,

into R&D, an expenditure unmatched by any of its competitors.7 All indications suggest

that JNJ’s emphasis on ongoing R&D has been a success. Products released in the five

years prior to 2014 were responsible for roughly one fourth of annual sales.8

The segment in which JNJ’s ambition to innovate is most apparent is

pharmaceuticals. In terms of dollars spent, nearly three fourths of JNJ’s 2014 R&D

occurred in pharmaceuticals. Fortunately, JNJ’s R&D in this field has paid off. As of

2014, the growth of JNJ’s pharmaceuticals segment was the greatest of the ten largest

pharmaceutical companies.9 With Remicade having already lost exclusivity in most of

the world and its US patent set to expire in 2018,10 JNJ must sustain the impressive

growth of its pharmaceuticals division. Between 2015 and 2019, JNJ believes it can

bring ten blockbuster drugs (products whose annual sales exceed $1 billion) to the

market. Seeing that JNJ launched seven blockbuster drugs between 2009 and 2014,

this forecast seems reasonable, especially considering that JNJ had seven drugs in the

Federal Drug Administration’s third stage of review at the start of 2015, and 20 more in

late-stage development.11

Given the unique dynamics of the name-brand pharmaceuticals sector, this sort

of vigorous, ultra-expensive R&D does not carry over into JNJ’s medical-devices and

consumer-goods divisions. Furthermore, much of the research in these fields seems to

be focused on improving existing products rather than developing altogether new ones.

For example, in 2014, JNJ counted women’s Rogaine and dissolvable Zyrtec among its

more successful ‘new’ products. Still, fine-tuning and reformulating existing products is

an endeavor that should not be dismissed. On top of that, though their output may not

be as research-intensive as pharmaceuticals’, medical device and consumer goods are

by no means backwaters of innovation. JNJ expected to launch 20 new consumer

products by the end of this year and 30 new medical devices by the end of the next.12

In addition to its continuing trend of strong internal product development, JNJ has

also been known to bolster its product lines through strategic acquisitions. Myriad more

recent, less large acquisitions could be cited, but the one that continues to garner

attention is JNJ’s 2012, $19.7 billion acquisition of Synthes, a Swiss orthopedic-device

manufacturer. Most reviews of the deal have been positive, citing increased operating

efficiency and research synergy as the chief selling point of the deal for JNJ.13 The

2006, $16.6 billion acquisition of Pfizer’s consumer-healthcare branch (which brought

leading brands like Listerine, Visine, Nicorette, Neosporin and many more on board)

represents another high-profile, noteworthy acquisition by JNJ.14

As far as management is concerned, it is widely agreed upon that JNJ’s is

decentralized. Although the Executive Committee is theoretically responsible for

overseeing and allocating resources among its three divisions,15 because JNJ is

composed of over 265 companies, senior management cannot reasonably be expected

to be fully aware of the inner workings of all aspects of JNJ’s variegated business. For

this reason, JNJ’s individual companies are granted a considerable amount of

autonomy by management, a practice that has been emphasized since the days of

legendary CEO Robert Wood Johnson II, who led JNJ from 1932 to 1968 and is often

credited with transforming JNJ into the titan it is today.16 Current CEO Alex Gorsky is

only the seventh in JNJ’s long history. Having held this position since just 2012, Gorsky

has kept investors’ confidence thus far. Gorsky’s handling of the Synthes acquisition in

particular, as well as his lengthy experience in JNJ’s pharmaceuticals and medical-

devices divisions, suggest his tenure as CEO should be successful.17

Financial strength

Financial analysts have a surfeit of ratios to choose from when evaluating the

performance of a company. The most important ratios pertaining to JNJ relate to

profitability, liquidity, and risk. In light of the tremendous scope of JNJ’s business,

operation ratios, which seem more fitting for a company with a more concentrated

focus, will not be examined here.

While the breadth of JNJ’s three-part product line is certainly impressive, all this

diversification would be for naught if JNJ were not profitable. The ultimate goal of any

capitalist company is to earn a profit, and a look at JNJ’s gross profit margin proves the

healthcare giant has been unquestionably successful doing so. From 2005 to 2014,

JNJ’s average gross profit margin, which measures the proportion of a company’s

revenue remaining after subtracting the cost of goods sold, was 68.77. Because gross

profit margin speaks to a company’s capacity to save and pay for expenses, this ratio is

an important one to analyze in all cases. Given the emphasis JNJ places on R&D, it is

arguably even more important at present. Though JNJ’s gross profit margin has

declined somewhat over the past decade (from an average of 70.28 from 2005 to 2009

to an average of 67.25 from 2010 to 2014), what stands out most when studying these

ten years’ worth of data is the consistency of JNJ’s gross profit margins, which never fell

below 65.81 or climbed above 71.20. Consistently high gross profit margins like JNJ’s

should appeal to any investor. That said, if anyone is dissuaded by the slight downward

trend in JNJ’s gross profit margin, it may help to note that JNJ’s operating profit margin

actually increased over the past decade, though again, not by much (from 24.61 in the

first half to 25.66 in the second half).

In addition to profitability ratios, liquidity and risk ratios are also worth

investigating. Looking back at the last ten years of JNJ’s current ratio, a metric used to

measure a company’s ability to pay off short- and long-term debt, two points stand out.

In 2005, JNJ’s current ratio was 2.48. The next year, it tumbled to 1.2. From here it

gradually rebounded, reaching 2.38 in 2011. The following year, it dropped once more,

to 1.9. Though other forces could be behind these rather dramatic declines in JNJ’s

current ratio, it seems most likely that these drop-offs were the direct result of JNJ’s

$16.6 billion acquisition of Pfizer’s consumer-healthcare division in 2006 and $19.7

billion acquisition of Synthes in 2012. With its current ratio sitting at 2.36 in 2014, JNJ is

once more in position to execute another high-profile acquisition to rival its marquee

2006 and 2012 ones. Alternatively, JNJ could make a number of smaller, more pointed

purchases, as it has been doing throughout the year. Acquisitions have played a key

role in JNJ’s development. Even the rights to Tylenol were secured by means of

acquisition.18 JNJ’s debt-to-assets ratio further supports the belief that the company is

equipped to make another mega acquisition. After sitting at 0.11 during the first five

years of the last decade, debt to assets increased only slightly to 0.15 in the last five.

An overvalued stock market

Before progressing to the value of JNJ’s stock alone, it is important to gain some

understanding of the value of the stock market as a whole. The stocks of all public

companies display some correlation with the markets on which they are traded, and JNJ

is no different. The recent August 2015 selloff serves as a good example. On August

17, the S&P 500 stood at 2,102.44 points. Over the next six days of trading, the S&P

500 tumbled to 1,867.61 points, a significant 12.6% decline that presumably resulted

from, among other things, a Shanghai Composite in distress and fears of rising interest

rates.19 During the same six-day time period, JNJ’s stock witnessed a similar 10.1%

decline, from $99.87 to $90.73.20 Though it is possible that some unfavorable news

surrounding JNJ broke during this period, the lion’s share of the blame for its dropping

stock price rests with the fall of the broader stock market. At the time of this selloff,

many observers declared that, after riding high for years, the stock market was

undergoing a correction. This crowd, in other words, believed that the troubled

Shanghai Composite and rising interest rates were not the sole culprits for the market’s

dip. The stock market had become overvalued, the logic continued, and stocks were

regressing to their more accurate prices. Since then, however, both the S&P 500 and

JNJ’s stock have rebounded to their pre-selloff levels.21,22

One tool that can be called on to determine if a legitimate correction is

forthcoming is the cyclically adjusted price-to-earnings ratio. Developed by Nobel prize-

winning economist Robert Shiller, this inflation-adjusted ratio, commonly known as

CAPE, is calculated by dividing the price of the S&P 500 by its ten-year, moving-

average earnings. At present, the CAPE is 26.2, a value 57.8% greater than its

historical average of 16.6.23 While it is important not to fall victim to myopia, it is also

worth noting that the CAPE has largely exceeded its historical average since 1990. The

last time the CAPE fell below its historical average was in the wake of the Global

Financial Crisis, reaching a low point of 13.3 in early 2009.24 This 25-year period in

which the CAPE has outpaced its historical average may partially explain why

investment strategist Russell Napier argues that stocks actually become overvalued

when the CAPE exceeds 23, not its historical average of 16.6.

As tempting as it is to ignore the advice of Napier and pray that the stock market

continues its upward path indefinitely, there is no avoiding the reality that stocks are

currently overvalued. Other market valuations like the Total Market Index to Gross

Domestic Product ratio only confirm this fact.25 Nonetheless, that stocks are presently

overvalued does not mean a so-called market correction, the sort that some thought

was underway in August, is imminent. Shiller himself is the first to admit this. “While

history suggests current levels signal a correction, it does not mean we will have one

soon. CAPE could go higher,” Shiller said in April 2015.26 Just how long we can

reasonably expect stocks to remain overvalued may surprise some. According to Cerno

Capital, the inevitable correction to stocks is likely to play out not over the course of the

next one or two years, but over the next ten.27 This prognostication by Cerno Capital

may seem like somewhat of a copout, but it also underscores the need not to let the

overvalued market discourage one from buying stocks altogether.

An undervalued stock

When assessing the stock of JNJ, the first metric worth examining is earnings

yield. Those familiar with stock valuation will be well aware that earnings yield is the

reciprocal of the ubiquitous price-to-earnings ratio. At present, it seems unlikely that

earnings yield will unseat the price-to-earnings ratio as the first-step valuation multiple,

which is somewhat of a shame. The appeal of dividing earnings per share by price per

share, as earnings yield does, is rather obvious: doing so produces a percentage, an

unquestionably more intuitive measure of the value of a stock than the less clear-cut

P/E. Furthermore, though outside the scope of this paper, working with earnings yield

rather than P/E allows for more straightforward comparison between stocks and bonds.

Listed below are ten years’ worth of earnings yields for JNJ and the S&P 500. All figures

below are taken from January 1st.28,29

Year

JNJ Earnings

Yield

S&P 500 Earnings

Yield

2006 5.44% 5.53%

2007 5.61% 5.76%

2008 5.27% 4.66%

2009 7.47% 1.41%

2010 6.88% 4.83%

2011 7.61% 6.13%

2012 5.28% 6.73%

2013 5.46% 5.87%

2014 5.29% 5..53%

2015 5.45% 4.99%

So as to avoid any confusion on the subject, it should be pointed out that earnings

yields, for a stock or any other security, represent a return on an investment. As can be

seen above, the earnings yields for JNJ have been remarkably consistent over the past

decade. By the same token, the earnings yields for the S&P 500 have been as well,

save for 2009. All in all, JNJ’s earnings yields were greater than the S&P 500’s in five of

the ten selected dates.

Closely related to earnings yield is dividend yield. Although earnings yield is said

to represent return on investment, for stocks, this return is often theoretical. Any

appreciation in a stock’s share price, which is no sure thing, is harvested by investors

only after they have sold their shares. In the case of JNJ, an investor who purchased a

single share of the healthcare conglomerate a decade ago would realize a significant

capital gain if he were to sell his lone share today. At the start of 2006, a single share of

JNJ traded at $61.03. Today, that same share could be sold for $100.27.30 Still, until an

actual sale is consummated, all capital gains are merely paper gains. Paid out to

investors on a quarterly basis, dividends, on the other hand, represent actual earnings.

To those growth-driven investors who scoff at income-conscious investors seeking out

dividends, it should be noted that, since 1930, dividends have accounted for 42% of

stock market returns. For years now, the dividends paid out by JNJ have been one of

the key attractions of holding its stock. Having raised its dividend 53 consecutive years,

JNJ is one of the, coincidentally, 53 companies that make up the S&P 500 Dividend

Aristocrats, a prestigious club of companies that have increased their dividends for at

least 25 straight years.31 JNJ’s quarterly dividend now sits at $0.75, up from $0.70 at the

open of 2015, meaning an investor holding a single share of JNJ will earn a $2.95

dividend for the year.32 With one share of JNJ trading at $100.27, JNJ is said to have a

dividend yield – annual dividend per share divided by price per share – of 2.9%.33 JNJ’s

annual dividend and dividend yields are shown below, alongside the average dividend

yield for the S&P 500. Note that the dividend yields are taken from the end of the

year.34,35

Year

JNJ Total Dividend

JNJ Dividend

Yield

S&P 500 Dividend

Yield

2006 $1.455 2.15% 1.76%

2007 $1.62 2.34% 1.87%

2008 $1.795 3.02% 3.23%

2009 $1.93 2.95% 2.02%

2010 $2.11 3.33% 1.83%

2011 $2.25 3.45% 2.13%

2012 $2.40 3.36% 2.20%

2013 $2.59 2.75% 1.94%

2014 $2.76 2.57% 1.92%

2015 $2.95 2.9% 2.03%

As mentioned earlier, the dividend yield can be said to be closely related to the earnings

yield because dividend payouts are made possible through earnings. What percentage

of earnings are to be reinvested in the company or distributed to the shareholders is up

to senior management. In the case of JNJ, management has made a clear point of

returning earnings to investors.

For those unconvinced of the value of JNJ’s $2.95 (and increasing) annual

dividend, a look at a multistage dividend discount model should be enlightening. As its

name suggests, a dividend discount model discounts predicted dividends back to

present value to produce an intrinsic value for a stock. Unlike a constant growth model,

a multistage model allows for a stock’s dividend to take on different growth rates at

different times. Traditionally, in the three-stage model, the one used here, a dividend’s

growth rate declines over time, eventually settling on a terminal rate of growth. Keeping

with tradition, this same trend will be followed here, at least to begin with. Though there

is no wrong place to start when constructing a dividend discount model, selecting a

discount rate seems like the most logical beginning point. As in the Gordon growth

model, the discount rate here is selected by summing JNJ’s dividend yield and dividend

growth rate. With a present dividend yield of 2.9% and a ten-year annualized dividend

growth rate of 7.32%, the Gordon growth model would call for a 10.22% discount rate.

For the sake of simplicity, a 10% discount rate is chosen instead. Selecting a discount

rate below 10%, an easy way to produce a higher intrinsic value, is advised against.

With a discount rate set at 10% and the first-stage dividend growth rate locked at

7.32%, JNJ’s annualized ten-year dividend growth rate, all that is left to do is select a

dividend growth rate for the second and third stages.

In doing so, it becomes quickly apparent that JNJ’s stock is grossly undervalued.

Selecting a second- and third-stage dividend growth rate of 4% yields an intrinsic value

of $110.34, significantly higher than JNJ’s current market value of $100.27. This 4-and-

4% dividend growth rate is incredibly conservative given the rate at which JNJ has

raised dividends in the last ten years. If we increase the second-stage growth rate to 5%

and keep the final-stage growth rate at 4%, JNJ’s intrinsic value increases to $116.91.

Holding the final-stage growth rate and 4% and raising the second-stage growth rate to

6%, a more realistic but still conservative scenario, produces a still higher intrinsic value

of $123.84. Importantly, this 6% second-stage growth rate, the most appropriate growth

rate, has not been arrived at arbitrarily. Sustainability of JNJ’s dividend growth, in this

case at a decreasing rate given its 7.32% ten-year annualized growth rate, must be

taken into consideration. Though the dividend payout ratio, the percentage of a

company’s earnings paid to shareholders in dividends, fluctuates from quarter to quarter

for all companies, JNJ’s annual dividend ratio has actually decreased over the last three

years.36 While not in line with the traditional multistage model, if we raise the second-

stage dividend growth above its current first-stage rate of 7.32% to 8% (not outside the

realm of possibility given a dividend payout ratio that has decreased over the last three

years and a promising pharmaceuticals pipeline that predicts the release of ten

blockbuster drugs in the next four years), we yield an even higher intrinsic value of

$138.91. Clearly, this model can be varied in a multitude of ways. That said, to reiterate,

the intrinsic value that seems most fitting is $123.84, the result of a conservative 6%

second-stage and 4% final-stage dividend growth rate. The results of still more

variations of this model can be seen in the appendix.

The final valuation metric worth examining is the price-to-earnings ratio, the

reciprocal of the already discussed earnings yield. Again, to be perfectly clear, the price-

to-earnings ratio is the ratio of price per share to earnings per share. Though not as

intuitive as the earnings yield, the P/E ratio still has merit, a fact evidenced in part by its

widespread popularity. In short, the P/E ratio represents the price investors are willing to

pay for $1.00 of a company’s earnings. Not necessarily useful in isolation, P/E ratios are

best employed as a means of comparing one company’s current valuation with that of

another company’s (or with the market’s as a whole). Fully aware that certain industries

– utilities and technology, for example – produce anomalistic P/E ratios, the typical rule

of thumb is that if the P/E ratio of Company A is less than the P/E ratio of Company B,

Company A is likely undervalued. Applying this same logic to JNJ and the market as a

whole, we realize that JNJ is currently undervalued. At present, JNJ’s P/E ratio is

19.48,37 considerably less than the S&P 500 P/E ratio of 23.41.38 Here, it is worth noting

that it is not typical for JNJ’s P/E ratio to be less than the S&P 500’s. As seen below,

between 2005 and 2014, the S&P 500’s P/E ratio was greater than JNJ’s in only three

years.39 It is also worth noting that the current S&P 500 P/E ratio of 23.41 is significantly

greater than its 1960-onward average of roughly 16, a fact which seems to underscore

how overvalued the market has become.40 Still, as mentioned earlier, a correction to this

overvalued market is some ways off, perhaps ten years down the line, and in this

presently overvalued market, which will remain overvalued for some time, JNJ is

decidedly undervalued.

Year JNJ P/E Ratio S&P 500 P/E Ratio

2005 19.1 17.3

2006 17.4 16.8

2007 18.4 16.5

2008 13.1 10.9

2009 14.6 18.6

2010 12.9 15.5

2011 16.0 13.7

2012 18.2 15.0

2013 20.4 18.6

2014 17.3 18.6

Buy, buy, buy

All in all, anyone with the ability would be foolish to pass up the opportunity to

invest in JNJ. The largest company in an industry, healthcare, posed for success in the

coming years, JNJ boasts an incredibly diverse product line that can be organized into

three broad segments: pharmaceuticals, medical devices, and consumer goods. Across

all three of its divisions, JNJ has displayed a commendable commitment to R&D,

especially in pharmaceuticals, that should enable it to maintain its leadership role within

the industry. With loss of exclusivity for its best-selling drug Remicade approaching, JNJ

has managed to develop a highly promising pipeline of future drugs. In addition to its

strong internal product development, JNJ has also been able to bolster its line of goods

for sale through fruitful strategic acquisitions. Financially speaking, JNJ maintained an

average annual gross profit margin of 67.25 between 2010 and 2014 which, though

slightly lower than its margin during the five preceding years, is still highly impressive.

Furthermore, JNJ’s upward-trending current ratio proves it is more than capable of

paying off all of its short- and long-term liabilities.

While a consistent earnings yield makes JNJ’s stock attractive to any investor,

the true selling point of this 265-company conglomerate is its dividend yield, which

exceeded the S&P 500 dividend yield in all but one year over the course of the last

decade. A Dividend Aristocrat, JNJ has increased its annual dividend 53 consecutive

years. In the last ten years, dividends have increased at an annualized rate of 7.32%.

All indications suggest that continued dividend growth is more than sustainable.

Constructing a multistage dividend discount model allows for the value of this dividend

growth to come to light. Applying a 10% discount rate and a conservative 6% second-

stage, 4% terminal-stage dividend growth rate to this model produces a $123.84

intrinsic value for JNJ, well above its current market value of $100.27. If this value,

coupled with its diverse product line and sound underlying financials, is still not enough

to convince an investor to buy JNJ’s stock, perhaps the realization that JNJ is currently

undervalued compared to the rest of the S&P 500 will be more convincing.

The only factor that might push an investor from buying to holding on JNJ is the

undeniable fact that the market as a whole is currently overvalued, with the CAPE

59.6% above its historical average. Still, the current 26.2 CAPE is nowhere near its pre

dot-com, bubble-bursting 44.19 high, and any downward correction to the market is

likely to play out not in the next couple years but over the next decade. For all these

reasons, to be unequivocally clear, any investor should buy JNJ.

APPENDIX

Gross profit margin

2005 71.26

2006 70.71

2007 70.33

2008 71.20

2009 67.91

2010 67.78

2011 67.16

2012 65.81

2013 67.56

2014 67.94

Operating profit margin

2005 25.75

2006 24.66

2007 22.36

2008 25.08

2009 25.19

2010 26.84

2011 23.96

2012 23.61

2013 25.77

2014 28.20

Current ratio

2005 2.48

2006 1.2

2007 1.51

2008 1.65

2009 1.82

2010 2.05

2011 2.38

2012 1.90

2013 2.20

2014 2.36

Debt-to-asset ratio

2005 0.05

2006 0.09

2007 0.12

2008 0.14

2009 0.15

2010 0.16

2011 0.17

2012 0.13

2013 0.14

2014 0.14

Cyclically adjusted price-to-earnings ratio

Multi-stage dividend discount model sensitivity analysis

Note: the second-stage dividend growth rates are located in the first row for all models;

the terminal-stage dividend growth rates are located in the first column for all models

10% Discount rate

3% 4% 5% 6% 7% 8%

3% $91.26 $96.57 $102.18 $108.10 $114.36 $120.97

4% $104.14 $110.34 $116.91 $123.84 $131.17 $138.91

5% $122.18 $129.65 $137.55 $145.90 $154.73 $164.05

6% $149.27 $158.63 $168.54 $179.02 $190.10 $201.80

9% Discount rate

3% 4% 5% 6% 7% 8%

3% $103.69 $109.83 $116.32 $123.18 $130.43 $138.08

4% $121.41 $128.79 $136.59 $144.84 $153.56 $162.76

5% $148.00 $157.24 $167.02 $177.36 $188.28 $199.83

6% $192.36 $204.70 $217.77 $231.59 $246.20 $261.64

11% Discount rate

3% 4% 5% 6% 7% 8%

3% $81.74 $86.41 $91.35 $96.57 $102.08 $107.90

4% $91.56 $96.92 $102.59 $108.58 $114.91 $121.59

5% $104.67 $110.95 $117.59 $124.61 $132.03 $139.86

6% $123.05 $130.61 $138.61 $147.01 $156.02 $165.46

ENDNOTES

1) Conover, Damien. “Recent drug launches are helping near-term growth for J&J by

mitigating competitive pressures.” Morningstar, 13 Oct. 2015. Web. 22 Oct. 2015.

2) 2014 Annual Report. Rep. Johnson & Johnson, n.d. Web. 5 Nov. 2015.

3) Johnson & Johnson: Annual Report Pursuant to Section 13 of the Securities

Exchange Act of 1934. Securities and Exchange Commission, n.d. Web.

5 Nov. 2015.

4) 2014 Annual Report, 15.

5) 2014 Annual Report, 17.

6) 2014 Annual Report, 14.

7) 2014 Annual Report, 7.

8) 2014 Annual Report, 12.

9) 2014 Annual Report, 8.

10) Johnson & Johnson: Annual Report

11) “3 Reasons Johnson & Johnson Stock Could Rise.” Investopedia, 1 July 2015. Web.

22 Oct. 2015.

12) 2014 Annual Report, 9.

13) Loo, Jeffrey. “Johnson & Johnson.” S&P Capital IQ, 31 Oct. 2015. Web. 5 Nov.

2015.

14) “Johnson & Johnson,” Loo

15) 2014 Annual Report, 12.

16) “Johnson & Johnson.” Reference for Business. N.p., n.d. Web. 5 Nov. 2015.

17) “Recent drug launches are helping near-term growth for J&J”

18) “Johnson & Johnson,” Reference for Business

19) Long, Heather. “The stock market drop… by the numbers.” CNN Money, 24 Aug.

2015. Web. 22 Oct. 2015.

20) “Johnson & Johnson Historical Prices.” Yahoo! Finance. Web. 22 Oct. 2015.

21) “Johnson & Johnson Historical Prices”

22) “S&P 500 Historical Prices.” Yahoo! Finance. Web. 22. Oct. 2015.

23) “Shiller P/E – A Better Measure of Market Valuation.” GuruFocus, 12 Nov. 2015.

Web. 12 Nov. 2015.

24) “Shiller P/E”

25) “Where are we with market valuations?” GuruFocus, 12 Nov. 2015. Web. 12 Nov.

2015.

26) Mahmudova, Anora. “Why Robert Shiller is calling this U.S. stock market ‘a great

enigma’.” Market Watch, 2 Apr. 2015. Web. 5 Nov. 2015.

27) Ren, Fay. “The CAPE Ratio Revisited.” Cerno Capital, 4 Dec. 2014. Web. 5 Nov.

2015.

28) “Johnson & Johnson Earnings Yield.” GuruFocus. Web. 22 Oct. 2015.

29) “S&P 500 Earnings Yield by Year.” Multpl. Web. 22 Oct. 2015.

30) “Johnson & Johnson Historical Prices”

31) Nickolas, Steven. “Johnson & Johnson: A Stock Dividend Analysis.” Investopedia.

Web. 5 Nov. 2015.

32) “Annual Dividends Issued.” Johnson & Johnson. Web. 5 Nov. 2015.

33) “Johnson & Johnson Trailing Dividend Yield.” GuruFocus. Web. 22 Oct. 2015.

34) “Johnson & Johnson Trailing Dividend Yield”

35) “S&P 500 Dividend Yield by Year.” Multpl. Web. 22 Oct. 2015.

36) “Johnson & Johnson: A Stock Dividend Analysis”

37) “Johnson & Johnson.” The Wall Street Journal. Web. 11 Nov. 2015.

38) “P/Es & Yields on Major Indexes.” The Wall Street Journal. Web. 11 Nov. 2015.

39) “Johnson & Johnson.” Morningstar. Web. 5 Nov. 2015.

40) Ro, Sam. “One good thing has come from the stock market rout.” Business Insider,

26 Aug. 2015. Web. 22 Oct. 2015.