Better Dividend King to Buy Right Now: Abbott Labs or Johnson & Johnson?
I'm LongbridgeAI, I can summarize articles.The article compares Abbott Labs and Johnson & Johnson, both Dividend Kings, to determine the better investment. While Abbott faces challenges with legal issues and slower growth, it is bolstered by its diabetes care unit and a $21 billion acquisition of Exact Sciences. Johnson & Johnson outperforms with strong revenue growth, new drug approvals, and progress in resolving talc lawsuits. The author concludes J&J is the superior buy due to stronger fundamentals, a longer dividend increase streak (64 years vs. 54), and better long-term prospects, despite a slightly higher valuation.
Investors looking for rock-solid dividend stocks can hardly do better than turning to Dividend Kings. This refers to a group of corporations that have raised their payouts for at least 50 consecutive years, an impressive accomplishment. However, not all Dividend Kings are created equal. Take Abbott Laboratories (ABT +2.19%) and Johnson & Johnson (JNJ +1.07%). Both healthcare giants belong to that group, and they have moved in opposite directions this year: Johnson & Johnson has beaten broader equities, while Abbott Laboratories has been a market laggard. Which of them is a better buy today?
Image source: The Motley Fool.
Can Abbott Laboratories rebound?
Abbott has faced several challenges over the past couple of years. First, revenue and earnings growth haven't been strong, particularly in its diagnostics and nutrition segments. Second, the medical device specialist has faced some legal and regulatory headwinds. For instance, it has dealt with lawsuits claiming that its baby formula caused health issues in premature babies.
These have somewhat tarnished the company's public image. However, the healthcare leader is looking to turn things around. It can still count on its core medical device segment, particularly its diabetes care unit, which remains one of its main growth drivers. Abbott's FreeStyle Libre, a line of continuous glucose monitoring (CGM) systems that help patients with diabetes track their blood sugar levels, continues to perform well.
NYSE: ABT
Key Data Points
Also important, the company acquired Exact Sciences earlier this year in a cash transaction valued at $21 billion. This deal brings Cologuard, a leading non-invasive diagnostic test for colorectal cancer, under Abbott's umbrella. It will help the company tap into the large and growing cancer diagnostic market and boost sales within its diagnostic division. So, Abbott could bounce back, and in the meantime, its dividend program remains intact. It has increased its payouts for 54 consecutive years.
Johnson & Johnson is firing on all cylinders
Johnson & Johnson started the year having loss U.S. patent exclusivity for Stelara, an immunosuppressant, in 2025. The company has also been facing challenges due to government-led drug price negotiations, as several of its medicines have been targeted. However, Johnson & Johnson has performed well. Thanks to its vast lineup of medicines, Johnson & Johnson's revenue and earnings continue to grow at a good clip.
The company should generate a little over $100 billion in sales this year, potentially marking only the second time in history that a biopharmaceutical company gets to that milestone. Several recent developments also make Johnson & Johnson's prospects attractive. For instance, the company earned approval for Icotyde, the first oral drug that targets the IL-23 receptor approved for plaque psoriasis. This should help strengthen the healthcare leader's position in immunology.
NYSE: JNJ
Key Data Points
Johnson & Johnson also earned clearance for the Ottava, a robotic-assisted surgery (RAS) system, earlier this year. There is a massive opportunity here. The RAS market is arguably underpenetrated, despite robotic systems enabling companies to perform minimally invasive surgeries across a range of specialties, leading to faster recovery times and shorter hospital stays for patients. The Ottava may become an important growth driver over the long run.
Further, Johnson & Johnson recently got one giant step closer to getting rid of thousands of lawsuits over the alleged harm its talc-based products have caused patients. Lastly, Johnson & Johnson's dividend track record is strong even by the standards of Dividend Kings, with the company having increased its payouts for 64 straight years. This is one dividend stock investors can count on.
Which one is the better buy?
My view is that Johnson & Johnson is a much better pick between these two companies right now. The pharmaceutical leader generates higher revenue and earnings, while also having grown its top-line at comparable rates in recent years (Abbott's revenue growth increase in its most recent quarter is partly due to its acquisition of Exact Sciences).
ABT Revenue (Annual) data by YCharts
Also, Johnson and Johnson has a more impressive dividend track record -- 64 years of straight annual increases versus 54 for its Dividend King peer. And although Johnson & Johnson is trading at 23x forward earnings, compared to 20.7x for Abbott -- the healthcare sector's current average is 19.2x -- it deserves a premium given its stronger underlying business and better prospects. That said, both companies are excellent picks for long-term income seekers.