Better Dividend King to Buy Right Now: AbbVie or Johnson & Johnson?
Key Points
These two companies are pharmaceutical giants.
Both seem somewhat overvalued at recent levels.
Still, they're likely to do well over the long term.
Dividend Kings are companies that have increased their dividends for 50 or more years in a row. If you're thinking of investing in one, you might be considering AbbVie (NYSE: ABBV) or Johnson & Johnson (NYSE: JNJ) stock. There are good reasons to invest in either -- or both -- and good reasons to favor dividend-paying stocks.
Here's a quick look at the two companies.
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Invest in AbbVie?
AbbVie is a pharmaceutical giant with a recent market value of $258 billion and a recent dividend yield of 2.7%. It boasts a deep pipeline, with about 90 treatments in development, some 60 of which are in mid- or late stages. It's exploring a promising weight-loss formulation, too.
The company recently inked a deal to buy Apogee Therapeutics for $10.9 billion. That will bring the promising eczema drug zumilokibart under AbbVie's roof, boosting its immunology portfolio.
AbbVie's stock has averaged annual gains of 17% over the past decade. Its stock seems a bit overvalued at recent levels, with a forward-looking price-to-earnings (P/E) ratio of 18, above its five-year average of 13.
Invest in Johnson & Johnson?
Johnson & Johnson, having spun off its consumer products division (including brands such as Tylenol), is now a robust business focused on pharmaceuticals and medical devices. Indeed, J&J boasts 28 products or platforms that each generate at least $1 billion per year.
Its second-quarter report was strong, with revenue growing 6.6% year over year to $25 billion. The stock has averaged annual gains of 9% over the past decade, lower than AbbVie's returns. J&J's stock also seems overvalued at recent levels, arguably a little more so than AbbVie's. Its recent forward P/E of 22 is well above its five-year average of 16. The dividend recently yielded 2.1%.
Which is the better buy?
Neither stock seems bargain-priced at recent levels. But I think AbbVie looks a bit more enticing based on valuation metrics, and it sports a fatter dividend yield.
Selena Maranjian has positions in AbbVie. The Motley Fool has positions in and recommends AbbVie. The Motley Fool recommends Johnson & Johnson. The Motley Fool has a disclosure policy.