The share price of Johnson & Johnson (JNJ 1.46%) is up a modest 7% over the past year, but 2021 looks like it might be an even better year for the pharmaceutical giant. You can say the same for Pfizer (PFE 1.20%), whose shares are down 0.7% over the past 12 months.

These are huge companies with diversified income streams that might be getting overlooked. Pfizer is already distributing its COVID-19 vaccine, and Johnson & Johnson is working on a one-dose coronavirus vaccine. But neither needs to depend on a successful vaccine to thrive in the new year.

In both cases, I think investors may be confusing steady with stodgy. These two companies have opportunities for growth in 2021, whether from Pfizer's large drug pipeline or Johnson & Johnson's growing stable of oncology drugs and a likely rebound by its medical devices segment.

Businessman with a scale weighing gold coins.

Image source: Getty Images.

1. Johnson & Johnson may be boring, but it's dependable

It's hard to believe that a company as well known and reputable as Johnson & Johnson is as undervalued as it is.

It currently trades at a little over 17 times forward earnings, compared to the typical pharmaceutical stock, which is trading with a forward price-to-earnings (P/E) ratio of 35.

Investors looking for wild growth aren't likely to find it in Johnson & Johnson, but if you're looking for dependable sales and steady returns, this is the stock for you. 

The company is on track for its third consecutive year of revenue growth. In the third quarter, it reported $21.7 billion in sales, a rise of 1.7% year over year. Earnings per share were $1.33, nearly double the year-ago figure. Through three quarters, net earnings were $12.9 billion, an increase of 16% year over year.

The medical devices segment reported revenue of $16.3 billion, down 15.3% compared to the first nine months of 2019. This was mostly due to the plunge in elective procedures during the pandemic, but the company's other divisions more than made up for the decline. The biggest segment, pharmaceuticals, reported nine-month revenue of $33.3 billion, a 5.2% rise over the same period in 2019. If we dig even deeper, we find that the company's oncology drugs were particularly successful, with a 12.4% year-over-year sales gain in the third quarter. The company's top oncology earners include multiple multiple myeloma drug Darzalex, which the company said brought in $2.9 billion in the first nine months of 2020, a rise of 35.5% year over year and blood-cancer drug Imbruvica, which it said had $3 billion in sales, a rise of 18.7% over the same time period in 2019.

Johnson & Johnson's COVID-19 vaccine, if approved, would be a single-dose regimen and one that doesn't require ultra-cold storage. It would work similarly to the Ebola vaccine, in that it stimulates the body to produce a protein that causes an immune response against the coronavirus.

It's tough to quantify what Johnson & Johnson's vaccine would be worth, but Pfizer charges $39 for its two-dose vaccine and Moderna charges roughly $50. Johnson and Johnson said the company plans to seek emergency use authorization (EUA) from the U.S. Food and Drug Administration (FDA) for its vaccine by February, and  is prepared to produce one billion doses of the vaccine this year.

With interest rates expected to remain low for a while, Dividend Aristocrats (companies that have raised their payout annually for 25 consecutive years or more) become more attractive. Johnson & Johnson has increased its dividend for 57 consecutive years, including a 6.3% raise this year to $1.01 per share, per quarter. At its current price, that's a yield of 2.57%, well above the S&P 500 average dividend of 1.62% in November. The benefit of Johnson & Johnson's dividend plus share growth gave investors a 12.25% rate of return last year.

2. Pfizer is much more than a COVID stock

Pfizer is getting interest as a "COVID stock" because its vaccine, BNT162b2, produced in collaboration with BioNTech (BNTX -0.45%), was the first one approved by the FDA after it was found to be 95% effective at preventing infection in clinical trials. The company's shares are up 11% in the few weeks since that announcement. But Pfizer's revenue will be strong in 2021, even without vaccine sales.

Revenue through the past nine months was down 8% year over year -- but that's a bit misleading. Much of the decrease was due to reduced numbers from the company's Upjohn division, which was spun off on Nov. 16. In the first quarter of 2021, Pfizer will be free of the new entity, Viatris.

Pfizer's biopharma margins look to be stronger without Upjohn's less profitable off-patent and generic products weighing it down. Just counting its biopharma division, the company's revenue was reported as $30 billion, up 6% year over year through nine months, and management expects a 6% compound annual growth rate through 2025 in the new Pfizer in 2021. That estimate is probably conservative because the company's COVID vaccine wasn't given EUA by the FDA until Dec. 11, nearly two months after the company's third-quarter report was released on Oct. 27.

Pfizer, like Johnson & Johnson, has a nice dividend. It increased it 3% last month to $0.39 a share, giving it a yield of 4.13%.

It has raised its dividend for 10 consecutive years, with a growth rate of 5.88% that is similar to Johnson & Johnson's dividend growth in that time frame.

PFE Dividend Growth (Annual) Chart

PFE dividend growth (annual) data by YCharts.

These stocks will help you sleep at night

Johnson & Johnson and Pfizer are the definition of value stocks. What they have lacked in growth, they make up for as steady income producers. They came through a difficult 2020 in great shape, considering the reduction in medical procedures and new prescriptions because of the pandemic.

Their vast revenue streams give them balance that smaller companies lack and plenty of cash for research and development for future products. On top of that, their consistent dividends make the stocks much easier to hang on to.