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You won't find many if any blue-chip healthcare stocks that are "bluer" than Abbott Laboratories (NYSE: ABT) and Johnson & Johnson (NYSE: JNJ). Both companies have been around since the late 19th century. Both are Dividend Aristocrats with decades of consecutive dividend increases.
But Abbott Labs and Johnson & Johnson have different business dynamics at work. Which of these two healthcare stocks is the better pick for investors? Here's how Abbott Labs and J&J compare in three key areas.
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Growth prospects
Abbott Labs has been the bigger winner by far when it comes to revenue and earnings growth in recent quarters. The company's momentum has been boosted by its super-successful Freestyle Libre continuous glucose monitoring (CGM) system and other new product launches. These new products should continue to drive Abbott's revenue and earnings higher in the future.
Sales for Freestyle Libre are picking up momentum. This growth is likely to accelerate once Abbott wins U.S. approval to market its second version of the system, which includes optional alarms to warn patients when glucose levels are out of range. Abbott is also poised to benefit as its continues to extend the functionality of its Alinity laboratory diagnostics products.
On the other hand, Johnson & Johnson's growth is slowing. The company's Q4 sales increased by only 1% year over year. J&J's top-selling drug, Remicade, faces competition from biosimilars. Its consumer healthcare business has struggled in international markets.
J&J does have products that should fuel future growth. Cancer drugs Imbruvica and Darzalex are high on that list. The company also is taking the robotic surgical systems opportunity seriously, recently announcing that it's buying Auris Health for $3.4 billion.
Wall Street analysts project that Abbott will grow earnings at a significantly faster rate than Johnson & Johnson will over the next five years. That's probably an accurate assessment. However, it's possible that strategic acquisitions by either company could impact growth prospects.
Dividends
There are two key things you need to look at when it comes to dividends -- yield and sustainability. Johnson & Johnson is the clear winner over Abbott Labs in the former category. The healthcare giant's dividend currently yields 2.6% compared to Abbott's yield of only 1.65%.
Both Abbott and J&J have great track records of paying and increasing their dividends. Abbott has boosted its dividend for 47 consecutive years. J&J has increased its quarterly dividend for 56 years in a row.