Johnson & Johnson: How Does An $11 Special Dividend Sound To You?

The price Johnson & Johnson (JNJ) paid for acquiring Actelion has most likely been a bit too high and destroyed shareholder wealth.

Even through the acquisition of Actelion is already old news, as a new JNJ shareholder, I became interested in what kind of earnings the acquired company has recently generated and whether the acquisition price was reasonable or not. JNJ released recently a SEC filing covering the financials behind the transaction in more detail. As I have mentioned already many times before, I am personally not interested in net income because of GAAP and IFRS standard issues. Instead, I always focus my attention first on the cash flow statement as that provides a much better picture of a company's true earnings power. Since I recently bought JNJ in the expectation to generate a reliable and growing dividend stream during my retirement, the condensed cash flow statement of Actelion was especially of great interest to me. After all, a $30 billion transaction must create shareholder value in the long term and provide an even stronger dividend growth for JNJ's current shareholders. By the way, that amount would actually translate into roughly an $11 special dividend.

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