The pharmaceutical industry is a great place to look for dividend stocks, and AbbVie (ABBV -0.38%) and Johnson & Johnson (JNJ 0.05%) are among the best. Both drugmakers generally grow their dividends at a good clip, and both are part of the highly exclusive group of Dividend Kings, having raised their payouts for more than 50 years straight. But which of these pharmaceutical giants is the better dividend stock? Let's look into both companies and decide. 

The case for AbbVie: It has an answer to the loss of Humira's patent exclusivity

AbbVie is going through a bit of a difficult period. In January, it started facing biosimilar competition in the U.S. for its blockbuster immunology medicine, Humira. The drugmaker expects its top line to decrease this year and the next as a result. But AbbVie's dividend is safe, and its prospects remain attractive. The company's lineup of medicines is vast, with several products that will help supplement Humira's sales drop gaining momentum.

One of them is the migraine treatment Qulipta. There is also cancer medicine Venclexta and AbbVie's Botox franchise. But AbbVie's most important growth drivers will be Skyrizi and Rinvoq, two immunology drugs taking over many of Humira's indications. For instance, Skyrizi proved more effective than Humira at clearing skin in plaque psoriasis patients. Skyrizi and Rinvoq are expected to surpass Humira's peak annual sales by 2027 and maintain their momentum thereafter.

So there is a long road of growth ahead for these medicines. Last year, AbbVie's net revenue increased by 3.3% year over year to $58.1 billion. The company's adjusted earnings per share (EPS) of $13.77 increased by about 16.4% year over year. As a Dividend King, AbbVie has raised its payouts for 51 consecutive years when taking into consideration that it used to be under the banner of medical device giant Abbott Laboratories. But since it split from its former parent company in 2013, AbbVie has increased its payouts by 270%.

Its current yield of 3.71% is higher than the S&P 500 average of 1.74%, and its cash payout ratio of 41.42% leaves plenty of room for further hikes. AbbVie looks strong enough to overcome the challenges to Humira and come out with a stronger company that still routinely rewards its shareholders with dividend increases.

The case for Johnson & Johnson: Its upcoming consumer health spinoff should boost revenue growth

Johnson & Johnson has a diversified business. The company is a leader in the pharmaceutical industry, with a presence in oncology, immunology, neuroscience, infectious diseases, and more. But the company also boasts a prominent medical device unit that recently got even stronger with the acquisition of Abiomed, which most notably provides oxygenation support medical technology.

There is another important way in which Johnson & Johnson is changing. The company is still splitting up its consumer health segment. The transaction should boost Johnson & Johnson's revenue growth as this segment has been trailing the company's two other units on this front. Regardless of all these changes, Johnson & Johnson will continue to generate solid revenue and earnings, just as it has in the past.

Last year, the drugmaker's top line increased by 1.3% to $94.9 billion. Johnson & Johnson's adjusted EPS came in at $10.15, rising by 3.6% compared to 2021. The healthcare giant does face some issues, most notably a barrage of lawsuits related to its talcum powder products. However, Johnson & Johnson has a robust balance sheet -- with an AAA rating from Standard & Poor's -- and it is more than capable of taking care of its obligations.

Johnson & Johnson has raised its dividend for 60 years straight, including by 71.2% in the past 10 years; its dividend yield is at 2.95%, also higher than that of the S&P 500. The company's cash payout ratio of almost 68% looks a bit high. But Johnson & Johnson's impeccable dividend record is unlikely to come to a halt anytime soon. 

The verdict: Both are great, but AbbVie has a higher yield 

Both companies are solid dividend stocks. They even have comparable forward price-to-earning (P/E) ratios, with AbbVie's 14.3 slightly lower than Johnson & Johnson's 14.7. So income-seeking investors can't go wrong with either. But which one is better for dividends? My vote goes to AbbVie, but only by a very slight margin. The company has a higher dividend per share ($1.41 vs. $1.13) and has raised its dividends much faster than its peer in recent years.

AbbVie's lower cash payout ratio shows that it can still afford to do so more than Johnson & Johnson, and what's more, AbbVie has a more attractive yield. Although the loss of patent exclusivity for Humira will be a challenge, AbbVie's revenue growth should pick back up in 2025. The company's business will be just fine over the long run and can support sustained dividend growth for a long time.