Having a million dollars when you retire is a good investment goal to aim for. Whether you invest that money in dividend-paying stocks that can help generate recurring income, or slowly withdraw funds, you’ll have plenty of options available to enjoy your retirement.
The key to investing for retirement is to put money in low-risk stocks that will keep your money safe while providing plenty of opportunities for it to grow in value over the years.
Johnson & Johnson (JNJ 1.46%) is a renowned healthcare stock to own, and it’s grown more than 150% in the past decade. But is it a stock that could potentially help you retire as a millionaire?
J&J stock performed on par with the S&P 500
Including dividend income, Johnson & Johnson shares are up 234% over the past 10 years, which is almost identical to the S&P500total yields of approximately 230%. The good and bad news for investors is that the company has not performed better than the broader markets.
While this is good for stability, it may not give investors much incentive to pick the stock over other comparable investments. Without a big catalyst for growth, there may be little reason to expect Johnson & Johnson to outperform the markets over the long term.
It will focus on the highest growth segments
Last year, Johnson & Johnson announced that it would spin off its consumer healthcare segment into a separate business. The company expects the new company to go public by November 2023. Rolling out this move could make Johnson & Johnson a more attractive growth investment. Sales in its consumer segment were flat last year, while the pharmaceuticals business grew 14% and medical device revenues jumped 18%.
There’s also the added incentive to walk away from a company that has been a constant headache for executives. From legal issues over talc-based baby powder to recalls of its Neutrogena and Aveeno products last year, the company could pose less risk to investors by focusing on pharmaceuticals and medical devices.
Other acquisitions could also be a possibility
In 2021, Johnson & Johnson’s revenue topped $93.8 billion, an all-time high for the company. And what is encouraging is that the company anticipates more growth to come. This year, he expects sales to be between $94.8 billion and $95.8 billion.
The company can accelerate its growth through acquisitions. A few years ago, it completed a $6.5 billion acquisition of Momenta Pharmaceuticals, which manufactures new therapies and can help expand J&J’s pipeline and growth potential. With the company consistently generating nearly $20 billion in free cash flow in each of the past three years, it is in a strong position to take on more deals in the future.
Stock can make you a millionaire – if you invest enough
To become a millionaire, you need an investment that can generate a lot of growth. Over the past 10 years, shares of J&J have averaged a compound annual growth rate of about 12.8% when you include its dividend. If it were to continue growing at this rate for 25 years, your investment would be worth more than 20 times what it is worth today. So an investment of $50,000 would be enough to get you to $1 million – assuming, of course, that you have at least 25 years left before you retire.
That’s not an unreasonable growth rate to assume since the stock pays a dividend that yields 2.7% and its business generates plenty of cash to allow for longer-term expansion. High-margin companies like Johnson & Johnson that bring in billions of dollars in cash can make solid long-term buys. And so I’m inclined to say it can make you a millionaire if you’re willing to invest at least $50,000 in the stock and hold it for the long haul.