Investors might think of several attributes when Johnson & Johnson (NYSE:JNJ) and Pfizer (NYSE:PFE) are mentioned. The longevity and stability of the two companies could come to mind. So could dividends. Both J&J and Pfizer have been longtime favorites for income-seeking investors.
But which of these two healthcare giants is the better dividend stock? Here's how Johnson & Johnson and Pfizer stack up against each other.
The case for Johnson & Johnson
Few stocks boast a dividend track record that surpasses that of Johnson & Johnson. The company is a Dividend King -- an S&P 500 member with at least 50 consecutive years of annual dividend increases. J&J's streak stands at 59 years. Only nine other companies have increased their dividends for a longer period.
Johnson & Johnson's dividend yield of 2.4% isn't bad, either. While it might not be as juicy as what some dividend stocks offer, investors can sleep soundly at night with confidence that the dividends will keep coming quarter after quarter.
The best dividend stocks don't just provide dividends. Even income investors would like to have solid share appreciation too. J&J appears to be in a good position to deliver on this front as well.
Wall Street analysts are optimistic about the healthcare giant's prospects. The consensus among analysts projects average annual earnings growth of nearly 9% over the next five years. That's a little better than the company's average annual adjusted earnings growth of 8% over the last two decades.
Johnson & Johnson isn't overly dependent on one product to generate this growth. It has 28 platforms or products that generate sales of at least $1 billion annually. And roughly one-fourth of the company's sales come from products launched within the last five years. Look for solid growth and solid dividends from this big company for a long time to come.
The case for Pfizer
Pfizer isn't a member of dividend royalty like Johnson & Johnson is. However, the company has steadily increased its dividend payout over the last 11 years. Pfizer initially thought that it would reduce its dividend a little with the merger of its Upjohn unit with Mylan. But the drugmaker generated enough money to avoid a dividend cut.
Throughout most of the last 12 months, Pfizer's dividend yield topped 4%. It now stands at 3.1%. This lower yield is due to the pharma stock soaring 35% during the period.
The company's COVID-19 vaccine developed with BioNTech has been the primary growth driver. Pfizer expects the vaccine will rake in $33.5 billion in sales this year, making it the world's top-selling healthcare product.
The big drugmaker could have another COVID-19 blockbuster on the way with PF-07321332. Pfizer hopes to file for Emergency Use Authorization of the antiviral drug later this year as post-exposure prophylaxis for individuals exposed to the coronavirus.
Pfizer isn't solely dependent on its COVID-19 programs for growth, though. Its lineup includes several other products with strong sales growth. The company even projects average annual adjusted earnings growth through 2025 in the low double-digit percentages without any of its COVID-19 sales included.
Better dividend stock?
I like both of these stocks. Johnson & Johnson and Pfizer have survived and thrived since the 19th century. Both companies have strong financial positions. Both have solid growth prospects.
Based on their dividend programs, though, I think that J&J is the better pick. I can't think of many better overall dividend stocks in the healthcare sector. The company has an impeccable track record of dividend hikes along with a solid dividend yield. J&J also has more diversified revenue sources than Pfizer does, which makes it less risky.
Pfizer will probably deliver stronger growth over the next few years. However, if your main focus is dividends, you won't go wrong choosing Johnson & Johnson.