Latest pharma spinoff should pay off

Article Excerpt

Johnson & Johnson recently announced that it would spin off its consumer drug business as a separate firm. This follows several other big pharmaceutical firms, including Pfizer, GlaxoSmithKline and Merck, that have completed similar spinoffs. The breakup will let Johnson & Johnson focus on its more-profitable prescription drug and medical device operations; that’s key as creating new drugs is more complex than enhancing existing over-the-counter products. Even though the consumer business has lower profit margins, its strong brands (some of which have been around for decades) should continue to generate steady cash flows. That will let it reward investors with regular dividend increases. JOHNSON & JOHNSON $171 is a spinoff buy. The company (New York symbol JNJ; Consumer sector; Shares outstanding: 2.6 billion; Market cap: $444.6 billion; Dividend yield: 2.5%; Takeover Target Rating: Medium; www.jnj.com) is an American multinational corporation that develops medical devices, pharmaceuticals, and consumer packaged goods. Johnson & Johnson operates through three major businesses: Pharmaceutical (55% of 2020 revenue) makes anti-infective, antipsychotic, contraceptive, dermatological, and gastrointestinal medicines; Medical…