As a long-term investor, I’m always looking for stocks that can provide me with a passive income. In particular, I like to set five-to-10-year goals for the income I’d like to receive. One that I have had my eye on lately is Johnson & Johnson (NYSE:JNJ). It pays a reasonable dividend of 2.57%, which worked out to $4.52 a share last year.
I like to have a balanced combination of growth and dividend stocks in my portfolio. I’ve recently added quite a few new growth stocks to my portfolio, so I think it’s time to add a dividend one into the mix. Here’s why I think Johnson & Johnson will be that stock.
Stability is the name of the game
The key reason why I’m considering Johnson & Johnson, which doesn’t have the biggest payout among dividend stocks, is that it has a remarkably stable share price.
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The last year has been challenging for a wide variety of shares. Yet while some companies saw double-digit price drops, Johnson & Johnson is down just 5.7% over the last 12 months.
Since I want to add it to my portfolio for dividends, I’m very conscious of the share price.
Dividends pay out a percentage based on the price of each share. Currently, to hit my goal of £1,000 in passive income, I would need 272 shares. If the share price drops significantly, the number of shares required to meet my £1,000 goal will increase.
Johnson & Johnson’s share price has been steadily rising for decades. Even during tough economic times, like the 2008 recession, the share price came through relatively unscathed.
Of course, past performance isn’t indicative of what will happen in the future. However, my hope is that the wide variety of essentials the company sells will keep it stable during these uncertain times.
Reaching 272 shares
At the current price of $162 (roughly £131), I’ll need a lot of capital to buy 272 shares, $44,064 (£35,668), to be exact. Unfortunately, I don’t have that kind of money sitting in my account to pour into a single stock.
Therefore, I plan to make regular purchases of the shares going forward. I could invest around $1,000 (£809) a month into the stock to hit my 272 share target in a little over three years. Assuming the price doesn’t increase too much in that time.
Since I’m investing for passive retirement income and plan to retire in 20-30 years, I have a little more time than that.
To begin with, I plan to start by buying three or more shares. At the current price, that would be around $486 (£393). I’ll then regularly add to my position to eventually reach that magic 272 number.
In the meantime, the key for me will be reinvesting my dividends back into more shares. That will help me to reach 272 shares without taking away from my other investments. I hope to have at least my target number by the time I’m 40 in 10 years’ time.
