Lessons from Johnson & Johnson

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I came across a book in my local library a few weeks ago, called Johnson vs Johnson. I have been fairly busy, so am only about a quarter of the way through it, and the book is more about the sad saga of battle between family members contesting the will of one of the second generation Johnsons, and the sometimes blighted lives of the children who inherited stock in the company. The book is fairly old now too, it was published in 1987.

However, the idea for an article came to me very early on in the book, as I read some amazing facts about the stock, even though the book is almost 30 years old, and the stock has in that time multiplied by about 30 times the price it was back then (split adjusted), and a dividend which is approaching the then price of the stock. The amazing thing is that if I had read the book back in 1987 I may have thought that the growth in the stock was fantastic, but surely it must come to an end soon, given such an incredible return.

So what did I read? “Seward Johnson was a second-generation inheritor. In order to accumulate his vast fortune, all he had to do was hold on to the stock in Johnson & Johnson bequeathed to him by his father and let his brother run the show.” This to me was very powerful in its relevance to becoming a Dividend Tycoon, because you could quite easily replace his brother with the current board of directors or employees, the key point is you do not have to do any work yourself, you can sit back after making the investment and enjoy the growth and subsequent dividends. However, what I read next was even more powerful. “In 1944 Seward Johnson’s stockholdings were worth approximately $9 million. Today those same holdings would be worth approximately $2 billion.” This was in 1987! Imagine what they would have been worth today, and all he had to do was hold on to the stock.

Now you may say he was lucky because nobody knew in 1944 where the stock would go, but if you had bought the stock in 1987 after watching this success over the previous 43 years, you would have a Johnson & Johnson dividend machine by now, it was hardly a secret success story in 1987.

Now, I have only just read part of this book, and have not analysed Johnson & Johnson in detail yet (I plan to though!), but the key point for me is that this is why it is great to be a Dividend Tycoon, and to hold stocks that are consistently profitable, and raise their dividends every year like clockwork, you are almost guaranteed a great result. It is not even hard to find them, it did not take me long to look around my house until I found a Johnson & Johnson product.

Now please excuse me as I go and look through the bathroom cabinet and kitchen cupboards for some other ideas for becoming a Dividend Tycoon.