Healthcare has given investors great opportunities for a long while, and pharmaceutical specialists in particular have seen plenty of solid gains over time. For Johnson & Johnson (NYSE:JNJ), pharmaceuticals aren't the healthcare conglomerate's only business, but it's been more successful for the company than its exposure to medical devices and consumer-oriented products. Meanwhile, Pfizer (NYSE:PFE) has been more focused on pharma, and that helped produce strong results for the company in 2018.

Lately, though, both J&J and Pfizer have struggled, sending their shares lower. That has investors thinking twice about the two blue-chip drug giants, but the long-term prospects both of these companies have to continue producing blockbuster drugs are substantial. With that in mind, let's take a closer look at Johnson & Johnson and Pfizer to see which one is a better buy right now for would-be shareholders.

Three people wearing lab coats looking at a round piece of plastic with the Pfizer logo on it

Image source: Pfizer.

Valuation and stock performance

Neither Johnson & Johnson nor Pfizer has put in a good performance over the past 12 months. Pfizer is down about 4% since January 2018, while Johnson & Johnson has seen an even steeper 11% decline.

Using traditional valuation measures, both of these stocks look relatively inexpensive. If you concentrate solely on backward-looking earnings for your evaluation, though, you'll get misleading numbers, largely because of the extraordinary impacts that tax reform and other one-time items have had over the past year. J&J trades at a trailing multiple of 23, while Pfizer fetches less than 10 times trailing earnings. However, when you bring in near-term future earnings estimates, the two stocks converge. Pfizer has a forward earnings multiple of 13, which comes in just a bit below Johnson & Johnson's corresponding 14 multiple. Pfizer looks just a bit more favorable on this front, but it's by a very small margin.

Dividends

Many drug-stock aficionados also like dividends, and both Johnson & Johnson and Pfizer are good about how they reward their shareholders with dividend payouts. Currently, Pfizer has a sizable edge on the yield front, paying about 3.5%. However, Johnson & Johnson's 2.8% yield is still well above the market average.

Johnson & Johnson has a much longer track record of delivering consistent dividend growth over the long run. The company's streak of annual dividend increases runs back for 56 years, and those increases have generally been pretty significant, including a healthy 7% boost in mid-2018. By contrast, Pfizer has only recently made up for lost time on the dividend-growth front, having followed its 50% dividend cut in 2009 by making 10 straight annual boosts of $0.02 per share to bring the total payout right now to $0.36 per share. Both J&J and Pfizer have what dividend investors want, and they have fairly comparable records when it comes to their payouts.

Growth prospects and risk

One recent concern for companies like Johnson & Johnson and Pfizer has been their ability to keep growing at a pace consistent with the recent past. When Johnson & Johnson reported its financial results earlier this month, it enjoyed an overall revenue gain from its pharmaceutical segment of 12% for the full year. Yet even though the list prices on many of its drugs continue to rise, J&J said its net prices in the U.S. fell between 6% and 8%, reflecting the promotional discounts that it's had to make in order to keep health insurance companies happy. Moreover, its outlook for 2019 and beyond was cloudy, with projected sales gains for pharma of less than 3% this year. Combined with sluggish results elsewhere within the healthcare conglomerate's operations, J&J could post flat revenue overall on an operational basis in 2019 -- a big potential disappointment for investors.

Meanwhile, Pfizer has had investors somewhat on edge as well. In its most recent report, the drug giant reported just 2% growth in operational revenue for the full 2018 year, with adjusted net income climbing 12% from 2017 levels. 2019 could be equally challenging, with expectations for between $52 billion and $54 billion in sales for the year coming in flat to slightly lower for Pfizer, in part because of adverse foreign currency impacts. Strength in Pfizer's innovative health segment came largely from blockbuster drugs like Ibrance, Eliquis, and Xeljanz, but losses of patent exclusivity for key treatments like Viagra and Enbrel weighed on results. Meanwhile, Pfizer's essential health unit saw wider declines, as strong emerging-market performance was able to offset only a portion of declines in the developed markets.

Banking on pharma

In many ways, both Pfizer and Johnson & Johnson are going through many of the same challenges. Pfizer gets my vote because of its higher concentration on pharma, although it too has consumer healthcare exposure through its recently announced joint venture with GlaxoSmithKline. Moreover, its slightly cheaper valuation and higher dividend yield give it a slight edge over Johnson & Johnson.

Check out the latest Johnson & Johnson and Pfizer earnings call transcripts.