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.
- 10 stocks we like better than AbbVie ›
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.
Should you buy stock in AbbVie right now?
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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.
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