If you'd been given the choice between buying either Merck & Co. (NYSE:MRK) stock or Johnson & Johnson (NYSE:JNJ) stock 10 years ago, the smart choice would have definitely been J&J. The healthcare giant's stock proved to be a much bigger winner.

But that was then. Which of these two stocks is the better pick for investors now? Here's how Merck and Johnson & Johnson compare.

Man facing decision with arrows pointing left and right

Image source: Getty Images.

The case for Merck

Merck lays claim to an asset that it didn't have a decade ago -- Keytruda. The cancer drug first won FDA approval in 2014 for treating advanced melanoma. Since then, Keytruda has been approved for four other indications plus expanded approval as a first-line treatment for melanoma.

Keytruda is the cornerstone of the investing argument for Merck. Sales for the drug topped $1.4 billion last year. Analysts think Keytruda can reach peak annual sales of close to $8 billion, so there should be plenty of growth potential remaining. 

Although Keytruda is definitely the most important component for Merck's growth strategy, the company thinks its pipeline can produce more winners. Experimental diabetes drug ertugliflozin, which Merck is co-developing with Pfizer, appears to have huge potential. 

Some of Merck's pipeline candidates could have much lower chances of success. Results are expected from a late-stage study of experimental cardiovascular drug anacetrapib within the next few months. Two other pharmaceutical companies failed in their attempts to advance drugs that use a similar mechanism of action. Merck is crossing its fingers for positive results in a late-stage study of verubecestat in treating Alzheimer's disease, but the drug has already flopped in another study for the indication. 

Merck also faces declining sales for several of its top-selling products, including autoimmune-disease drug Remicade and cholesterol drug Vytorin. However, the company should still be able to grow earnings by nearly 7% annually over the next few years, thanks largely to climbing sales for Keytruda. In addition, Merck's dividend yield of 2.98% provides a nice bonus for investors.

The case for Johnson & Johnson

Johnson & Johnson has a cancer drug with fast-growing sales and considerable potential as well. However, J&J partner AbbVie takes a bigger chunk of sales from Imbruvica than Johnson & Johnson does. 

It's the same story with another of Johnson & Johnson's current winners. J&J made nearly $2.3 billion on anticoagulant Xarelto last year -- up almost 23% from the prior year. However, Bayer received around $3.1 billion from the drug.

But growth is growth, and Johnson & Johnson should get plenty of growth from other current drugs. Darzalex appears to have solid potential. It's already approved as a second-line treatment for multiple melanoma in combination with Revlimid or Velcade. The drug is being evaluated in late-stage clinical studies in combination with other drugs as a first-line treatment for the indication.

Niraparib, which J&J licensed from Tesaro, recently won approval as a maintenance treatment for recurrent epithelial ovarian, fallopian tube, or primary peritoneal cancer. The drug could become another blockbuster for Johnson & Johnson.

Like Merck, Johnson & Johnson has a few challenges. One stems from a product that the two companies have a partnership -- Remicade. J&J is being hurt by declining Remicade sales even worse than Merck is. Also, Johnson & Johnson's consumer and medical device business segments aren't contributing much growth for the company.

Despite these headwinds, Wall Street analysts think that Johnson & Johnson will grow earnings by an average annual rate of nearly 6% over the next few years. As is the case with Merck, J&J's dividend yield of 2.6% along with its stellar track record of increasing its dividend gives investors an added reason to like the stock.

Better buy

All the numbers point to Merck being the better buy between these two healthcare leaders. Merck should have slightly better earnings growth. It boasts a higher dividend yield. Merck's valuation also looks more attractive than J&J's does.

My instinct, however, is to give the nod to Johnson & Johnson. The company's planned acquisition of Actelion should strengthen its pipeline. There's also an intangible factor with J&J: Long-term investors just love the stock. Johnson & Johnson outperformed every other big pharma stock last year, despite having lower earnings growth than several others (including Merck).

Both of these stocks are solid picks, in my view. If I could only buy one, though, I'd go with Johnson & Johnson. Investing isn't always merely a numbers game.  

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.