Tuesday, May 14, 2013

JNJ or KMB ?

Johnson & Johnson or Kimberly Clark? 

The stock market is going up because, in my opinion, average investors are chasing the most recent winners.   The most recent winners are the big companies that pay dividends.  They hear over and over that these are the companies for income investors.  They can’t get any income from bonds and those stocks just keep going up.  It’s time to get in on this market at least a little.

Johnson & Johnson, JNJ

I do not think you should buy a stock like Johnson & Johnson, symbol JNJ at this time.   The dividend income has not kept up with the stock price.   The stock price has gotten ahead of the earnings.  Earnings drive dividends and the dividend is less than three percent.    If you already own JNJ and you receive more than three percent on your basis, stick with it.  You have a winner.  I think your dividend income will continue to increase.  But, if you buy JNJ today, with only a 2.7 percent yield, and the stock retraces its gains, you will be kicking yourself.

Kimberly Clark, KMB

If you have to invest today because your money is making you no money elsewhere, and you want what has worked lately, you could go with Kimberly Clark, symbol KMB.   You still risk losing value on your basis if the stock price goes down, but your basis will earn more than three percent and your income will increase every year and eventually, KMB will again reach all-time highs again.

Stick with your discipline.