With a market cap of over $583 billion ($450 billion USD), Johnson & Johnson is among the largest healthcare companies in the world, boasting a product lineup that spans pharmaceuticals, devices and consumables.
It’s no wonder, then, that you may want to invest in this blue chip company that cares for millions of people around the globe every year.
How to Buy Johnson & Johnson
1. Pick a Brokerage
To buy any stock, you need an investment account. If you don’t already have one, or would prefer to pick a new one, you can head over to our list of best online brokers and best investment apps to help you choose.
You’ll want to pick a platform that allows easy stock trading with low or no trading fees and minimums. Consider if a brokerage has the account type you need, too.
In Canada, pretty much all the leading online brokerages, from Questrade to WealthSimple, offer the ability to put any kind of investment vehicle, including stocks, inside a registered tax-advantaged account, such as a Registered Retirement Savings Plan (RRSP), a Tax-Free Savings Account (TFSA) or even a Registered Education Savings Plan (RESP) to save for your child’s education.
2. Decide Your Investment Goals
Before you buy JNJ, you should first make sure buying shares is in line with your broader financial goals.
Why are you investing? for income? If so, JNJ has a current dividend rate of about 2.5%. While that’s not bad—it’s certainly more than you’d earn on even the most generous promotional interest rates in a savings account—it’s still less than you might earn elsewhere with comparatively safer investments, like bonds.
Though keep in mind, if you are collecting a dividend from JNJ as a Canadian, you will have to pay at minimum a 15% withholding tax to the IRS thanks to Canada’s tax treaty with America. If you want the 15% and not the typical 30% for foreign investors, you’ll have to have filed a W-8 BEN form with your brokerage. The IRS does recognize the tax-deferred status of the RRSP so the best place to put a stock that pays a dividend like JNJ is inside an RRSP so you don’t have to pay the withholding tax or any tax at all.
If your goal for investing is to generate growth in your portfolio, you may also want to reconsider. Johnson & Johnson is an old and established company, so while the company’s stock tends to appreciate each year, it doesn’t often achieve the same growth rate you might get by investing in smaller-cap stocks or growth stocks.
Instead, JNJ may be best thought of as a pillar of an investment portfolio, offering steady returns that may help protect the core of your investment through good times and bad.
3. Determine How Much You Want to Invest
Chances are you don’t want to go all in on JNJ. That means you’ve got to decide how much you can actually invest in the company. To figure out that amount, consider the following:
- What’s your budget? You should ideally only invest what you don’t need to cover your regular expenses and contributions to retirement accounts and emergency funds. Once you’ve got those bases covered, you’re free to invest whatever’s left in JNJ and other stocks.
- What’s JNJ’s current price? JNJ’s price has been over $100 for more than five years. If you don’t have enough to buy single shares, or would prefer to spread your money across many different companies, you’ll need to find an investment platform that lets you purchase fractional shares. These let you buy small portions of stocks, so you don’t have to fork over the whole face value of a stock.
- What’s your investing strategy? People generally invest one of two ways: with a large sum all at once or with small amounts steadily over time. This second method, called dollar-cost averaging, may help you pay less per share over time on average as well as reduces the risk you buy more when the price is high.
- What about your other investments? You likely won’t begin and end your investing journey with JNJ. Instead, you’ll want it to complement other investments in your portfolio. That means you’ll want to invest in a range of similar and different stocks to provide diversification and reduce your portfolio’s overall risk.
4. Evaluate Johnson & Johnson’s Finances
As a public company, Johnson & Johnson is legally required to divulge certain information about its innerworkings, including its financial situation. So before you buy shares of JNJ, take time to review these figures and ensure you’re comfortable with how it’s being run.
You can find this information through JNJ’s investor resources page or by using the US Security and Exchange Commission’s (SEC) database. You may want to complement it with analysis from research resources at Globe Investor or your brokerage’s educational offerings.
5. Determine Your Order Type and Place Your Order
To buy Johnson & Johnson stock, log into your brokerage platform, enter its ticker (JNJ) and input the number of shares or dollar value you want to buy. You may also have to choose which kind of order type you want to fill. Two of the most common are market and limit orders.
If you definitely want to buy shares of JNJ, your best bet is to keep it simple with a market order—this is where you buy shares at the prevailing market price, even if it fluctuates slightly after you enter your order.
If you only want to buy shares at a certain price, consider a limit order. This order type lets you decide the maximum amount you want to shell out per share, and the order is only goes through if shares can be bought at that price or less. Keep in mind, though, that if the stock rises before you enter your order, it may not be executed.
For very volatile stocks, a limit order can be very helpful in keeping you from unexpectedly buying a share for more than you intend with a market order.
6. Watch Out for Currency Conversion Fees
Whenever you are buying an American stock with Canadian dollars, you will pay currency conversion fees on top of the normal exchange rate. These fees range from 1% to 4% when you buy and they are charged again when you sell and your money is converted back into Canadian dollars.
They can be bypassed either by opening a US dollar bank account at a Canadian bank and just keeping the money you use to buy US stocks in American dollars at all times or you can perform Norbert’s Gambit.
Norbert’s Gambit is when you buy a stock or ETF that’s interlisted on American and Canadian stock exchanges. You buy Canadian shares of that stock, then you ask your brokerage to “journal over” your Canadian shares into the American listing and make them into American shares of the same stock. You then sell your American shares and can use the US dollars that result to purchase any American stock or ETF you want (including JNJ) without converting currency.
How to Sell Johnson & Johnson Shares
When you decide to sell your J and J stock, the process is mostly the same as buying—all you need to do is log into your brokerage account and enter a sell order online with the amount of shares or dollar value you wish to sell. As with purchases, when you sell stock you can do so at the market price or with a set limit price.
Taxes are also an important consideration when selling stock. If you purchased your shares in an RRSP or TFSA (for stocks that don’t pay out a dividend) then you don’t need to worry about this. However, if you bought shares in a normal investment account and sell them at a profit, you may face additional taxes, like capital gains.
The good news is, Canadians only have to pay capital gains to the CRA on their Canadian income tax, which is 50% of the value, and won’t have to pay capital gains to the IRS unless they have a more than 5% stake in an American Corporation that considers its primary asset US real estate.
If you happen to make $5 million USD on your US based investments, your estate will owe an estate tax to the IRS when you die.
If you’re positioned for significant gains, speak with a tax professional to strategize ways to minimize your taxes in Canada and the US
Other Ways to Invest in JNJ
If you want to invest in JNJ but don’t want the risk of owning individual stocks, you can instead buy shares of index funds and exchange-traded funds (ETFs) that decrease your risk but still provide exposure to stocks like Johnson & Johnson.
Luckily, as the 12th largest component of the S&P 500, it’s easy to find funds that invest in JNJ. S&P 500 funds will generally allocate just over 1% to Johnson & Johnson.