3 Reasons Johnson & Johnson Is Still a Buy With Its Stock Near a Record High

Johnson & Johnson (NYSE: JNJ) seems to be firing on all cylinders. The company's financial results have been strong this year, leading to a solid stock market performance. Johnson & Johnson's shares aren't too far from their all-time highs right now. However, even at current levels, it's worth investing in the company, at least for investors focused on the long game. Let's consider three reasons why.

1. Johnson & Johnson's deep pharmaceutical pipeline

Perhaps Johnson & Johnson shouldn't be performing as well as it is. After all, the company's core Innovative Medicine business is experiencing some troubles, including stiff competition -- biosimilar and otherwise -- as well as government-led drug price negotiations. These troubles could have prevented Johnson & Johnson's sales and earnings from moving in the right direction if it hadn't had such a deep and diversified lineup of medicines across various therapeutic areas. The challenges Johnson & Johnson is facing won't go away, but investors can be confident in the company's future because its pipeline suggests it can continue to launch innovative products fairly regularly.

Johnson & Johnson is running dozens of clinical trials that could lead to new approvals or label expansions. One promising candidate in the company's pipeline is ramantamig, an investigational medicine for multiple myeloma with a novel mechanism of action that could differentiate it from existing drugs in this setting. Ramantamig is undergoing Phase 3 studies, and Johnson & Johnson estimates that it could hit peak annual sales between $1 billion and $5 billion.

Several other medicines in the company's pipeline look equally promising, and some new approvals, such as ICOTYDE for plaque psoriasis, are also poised to be blockbusters. Johnson & Johnson will encounter the occasional clinical or regulatory setback. No pharmaceutical company can completely eradicate this risk. However, the drugmaker's pipeline is deep enough to secure new approvals regularly and to deal with competition and patent cliffs while still growing its sales and earnings at a good clip.

2. Ottava could be a growth driver for a long time

Johnson & Johnson's business is diversified beyond its pharmaceutical division. The company's medtech segment also contributes meaningfully to its financial results. Johnson & Johnson markets medical devices across several areas, including vision, surgery, and cardiovascular health. The company recently strengthened its medtech division with the July clearance of the Ottava robotic-assisted surgery (RAS) system for general soft tissue procedures.

Johnson & Johnson will be fighting an uphill battle in this industry. The market leader, Intuitive Surgical (NASDAQ: ISRG), first earned clearance for its da Vinci system more than two decades ago. But the good news is that there is a large addressable market here. As Johnson & Johnson noted, fewer than 8% of relevant soft-tissue procedures are performed robotically.

That's important because, thanks to tiny, highly maneuverable instruments, robotic systems help surgeons avoid making large incisions. That can result in less bleeding, less scarring, and faster recovery times for patients. And considering how underpenetrated the worldwide market still is, there is more than enough room for multiple winners. This device may prove to be an important long-term growth driver for Johnson & Johnson, especially given secular tailwinds such as the world's aging population, which will drive higher demand for the kinds of procedures it helps facilitate with Ottava.

3. The dividend is rock solid

Arguably, one of the most attractive aspects of Johnson & Johnson is the company's dividend program. Johnson & Johnson stands out here. The company is a Dividend King, meaning it has increased its payouts for at least 50 consecutive years. Even within this elite group, Johnson & Johnson is impressive: It has increased its dividend for 64 years (and counting). Very few corporations have done better. Meanwhile, Johnson & Johnson also offers a forward yield of 2%, higher than the S&P 500's average of 1.1%. Johnson & Johnson's outstanding dividend program is another great reason to buy and hold the stock for the long term.

Prosper Junior Bakiny has positions in Intuitive Surgical and Johnson & Johnson. The Motley Fool has positions in and recommends Intuitive Surgical. The Motley Fool recommends Johnson & Johnson and recommends the following options: long January 2028 $520 calls on Intuitive Surgical and short January 2028 $530 calls on Intuitive Surgical. The Motley Fool has a disclosure policy.