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JNJ or ABT: Which Company Returns Higher Shareholder Value?

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The value returned to shareholders

In its third-quarter earnings conference call, Johnson & Johnson (JNJ) highlighted its strategy of creating value for shareholders by entering collaborations and external partnerships. The company attributes half of its innovation to its inorganic growth strategy.

According to its third-quarter earnings conference call, in fiscal 2017, the company completed more than 30 tuck-in deals worth more than $1.0 billion, which have in turn played a major role in boosting the performance of Johnson & Johnson’s medical device segment. In the first nine months of 2018, the company has completed almost 26 deals including acquisitions, co-promotion deals, and equity interest deals to further create value for shareholders. In its third-quarter earnings conference call, Abbott Laboratories (ABT) has highlighted its use of capital to maintain a targeted dividend payout range in addition to focusing on growth and debt management initiatives.

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Dividend expectations

Wall Street analysts have forecasted Johnson & Johnson’s dividend per share to be $3.57, $3.81, and $3.96 for fiscal 2018, fiscal 2019, and fiscal 2020, respectively. These estimates imply a YoY rise of 7.59%, 6.65%, and 3.83% for fiscal 2018, fiscal 2019, and fiscal 2020, respectively.

On the other hand, Abbott Laboratories (ABT) is expected to report dividends per share of $1.13, $1.22, and $1.35, for fiscal 2018, fiscal 2019, and fiscal 2020, respectively. This implies a YoY change of 6.56%, 8.11%, and 10.54% for fiscal 2018, fiscal 2019, and fiscal 2020, respectively. Johnson & Johnson is returning higher dividends per share as compared to Abbott Laboratories.

The five-year average historical dividend yield for Johnson & Johnson is 2.66%, while that for Abbott Laboratories it’s 2.02%. The current dividend yield of Johnson & Johnson is 2.79%, while that of Abbott Laboratories is 1.82%. Both the historical dividend yield and the current dividend yield of Johnson & Johnson is higher than those of Abbott Laboratories.

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