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Johnson & Johnson

Pharmaceutical giant Johnson & Johnson (JNJ) is one of O’Leary’s top picks. “I love it,” he said in reference to the company, whose products range from a COVID-19 vaccine to Tylenol.

But the stock has disappointed investors in recent years. It’s currently trading at around $155, roughly the same level it was in late 2020. That means investors have had zero capital gains over three years.

The dividend isn’t impressive either. Johnson & Johnson currently offers a 3% dividend yield. That’s lower than the yield on a 30-year U.S. Treasury bill, which has been above 4% as of late.

Nor is the stock cheap. It’s trading at 29 times earnings per share, which is well above the S&P 500 ratio.

For investors seeking wealth creation, there are arguably better options on the market.

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Home Depot

Another O’Leary stock pick is Home Depot Inc. (HD). The home improvement retailer is widely considered a reliable bet for investors. O’Leary likes it because of its size, strong balance sheet and dividends.

However, Home Depot’s dividend yield, at below 3%, is even lower than Johnson & Johnson’s. To put that into context, the U.S. inflation rate is 3.1%, based on the most recent data, which means the dividend isn’t even helping preserve purchasing power for investors.

Home Depot is also forecasting a small dip in revenue and earnings per share this financial year.

On the positive side, the company announced a $15-billion share buyback program in August, which is a bright green flag.

Exxon

Oil and gas giant Exxon Mobil Corp. (XOM) is another stock that O’Leary seems to love. The stock is probably the cheapest one on his list. Exxon currently trades at just around 11 times earnings per share.

And given that the company recently projected a better than two-fold increase in earnings through 2027, the stock may prove a real bargain at its current price.

Exxon offers a 3% dividend yield, but that is enhanced by the company's pledge to increase share buybacks to $20 billion in 2024, from $17 billion in 2023.

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About the Author

Vishesh Raisinghani

Vishesh Raisinghani

Freelance Writer

Vishesh Raisinghani is a freelance contributor at MoneyWise. He has been writing about financial markets and economics since 2014 - having covered family offices, private equity, real estate, cryptocurrencies, and tech stocks over that period. His work has appeared in Seeking Alpha, Motley Fool Canada, Motley Fool UK, Mergers & Acquisitions, National Post, Financial Post, and Yahoo Canada.

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