Medicine is the cornerstone of healthcare. That remains true today, with a global pharmaceutical industry valued at $1.4 trillion and expected to grow at 6.1% annually through 2030. In this light, it's hard to foresee the industry going anywhere, making the companies that dominate the sector fantastic stocks any long-term investor can consider.
You don't even need much money to get started. Pfizer (PFE -0.43%) and Johnson & Johnson (JNJ -0.24%) are industry stalwarts with long track records, generous dividends, and solid growth prospects. Plus, their compelling valuations make them timely buys.
If you have $200 (or more) available to invest in stocks, you might want to consider buying a share of each and holding them for the long haul. Here's why.
Pfizer is a post-pandemic bargain with a storied past and a bright future
Pfizer's rich history dates back to the mid-1800s. Although the company's products have changed through innovation and mergers, it remains one of the leading pharmaceutical companies. Most recently, Pfizer has been known for its COVID-19 vaccine (Comirnaty) and treatment (Paxlovid), which combined for $56.7 billion in sales at their peak in 2022. That business has largely dried up with COVID-19 cases greatly reduced, and the resulting top- and bottom-line declines have sunk the stock to its lowest price levels in a decade.
However, Pfizer is chugging ahead and reinventing itself, a key ability for any company that wants to last in the pharmaceutical industry. The company has pegged its future growth on its oncology pipeline, which includes an influx of high-potential drugs following its $43 billion acquisition of Seagen in 2023. Revenue and earnings bottomed and started growing again in 2024, setting the stage for a bright future. Analysts expect Pfizer to grow earnings by an average of 14% annually over the next three to five years.
Investors get a stock in Pfizer that has proven it can evolve to stay relevant. It also offers a dividend yielding 6.3% today, backed by a strong payout ratio (57% of earnings). The stock could generate double-digit total investment returns well into the future, especially with shares valued at less than 10 times forward earnings estimates.
Johnson & Johnson is a dependable Dividend King that will make you rich slowly
Johnson & Johnson is another old-timer in healthcare, dating back to the late 1800s. Although it's a pharmaceutical company at its core, it is more diversified, with a sprawling MedTech segment that sells medical devices and other products. In August 2023, the company spun off its consumer products business as Kenvue. Johnson & Johnson's dividend is its claim to fame among investors. It's a Dividend King with 62 consecutive annual dividend increases.
Are you looking for explosive growth? If so, Johnson & Johnson probably isn't for you. A combination of innovation, acquisitions, and share repurchases drive slow and steady earnings growth. The business is too big to move much faster than that. However, impeccable consistency makes up for what it lacks in growth. It takes a special business to grow for decades, sharing more profits with investors year after year.
Paying the right price is crucial when investing in a slow-growing company. Johnson & Johnson's stock trades at a forward P/E ratio of just over 13, a compelling value for such a quality business -- even if analysts only expect 5% to 6% annualized long-term earnings growth. Most companies come and go, but Johnson & Johnson is as close as they come to a timeless investment. Its modest growth and 3.5% dividend yield may only produce 6% to 10% annualized returns, but it will keep delivering, compounding wealth for patient investors.
