Published Wed, 11 Jan 2017 15:27:45 -0500 on Seeking Alpha
Johnson & Johnson's Cash Pile Could Come Home
As the United States makes ready for the inauguration of President-Elect Trump, companies like Johnson & Johnson (NYSE: JNJ) are likewise considering their strategic alternatives as the reality of business-friendly tax reform looms.
Specifically, President-Elect Trump's desire to reduce taxes on corporations overall - as well as give large American multinationals a one-time incentive to bring their overseas profits (in the form of significant cash reserves) back home - should provide corporate chiefs with ammunition to pursue acquisitions, in addition to boosting returns to shareholders in the form of dividends and share buybacks.
J&J is no exception - by some estimates, it keeps all of its cash overseas to defer paying taxes. In a recent 'fireside chat' at the JP Morgan Healthcare Conference, J&J's CEO, Alex Gorsky, suggested that the odds of it repatriating its $40.4 billion cash trove has increased in light of Trump's victory.
Before we look at how J&J will look like as Trump takes over, it's worth noting that it remains one of the strongest dividend plays among blue chips. To wit, while its 2.75% dividend yield is not particularly high, it remains above the averages of both the S&P500 and Dow Jones Industrial Average, both off which count J&J among their components. This yield is also around 70-basis points better than the average of its... Read more