Abbott Laboratories (ABT), AbbVie Inc (ABBV): This Healthcare Giant is Definitely a Great Buy Now

Pays low dividend yield but has the cheapest valuation

If investors favor income, they should stick with AbbVie with its juicy dividend yield of 3.8%. Abbott offers a much lower dividend yield of only 1.6%. One of their peers, Johnson & Johnson (NYSE:JNJ) also pays quite nice dividends with a yield at 3.2%.

Among the three companies, Abbott is the most cheaply valued on the market. At $35.60 per share, Abbott is worth nearly 4.7 times its trailing EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization). AbbVie is valued much more expensively. It is trading at $42.60 per share, with the total market cap of $67 billion. The market values AbbVie at 9.6 times its trailing EBITDA. Johnson & Johnson (NYSE:JNJ) had the highest EBITDA multiple of the trio. It is trading at $83.20 per share, with a total market cap of $233.70 billion. It is valued at nearly 10.5 times its trailing EBITDA.

Recently, Johnson & Johnson (NYSE:JNJ) expanded its oncology drug business by acquiring Aragon Pharmaceuticals for around $1 billion, with $650 million in upfront cash payment. With the recent acquisition, Johnson & Johnson (NYSE:JNJ) could have the right on the company’s ARN-509, a prostate cancer drug in Phase II development, improving the company’s drug pipelines. Johnson & Johnson (NYSE:JNJ) felt bullish about the recent acquisition. Its global therapeutic area head Peter L. Lebowitz commented

The acquisition of Aragon further enhances our leadership in prostate cancer drug development. ARN-509 complements ZYTIGA® and provides the potential for exciting, novel approaches to treat prostate cancer patients. Prostate cancer is one of our main areas of focus, and we are pleased to be adding ARN-509 to our portfolio.

My Foolish take

I am quite excited about Abbott, as it owns a strong, diversified brand portfolio with leading market positions. With quite a low valuation, a strong balance sheet and the upcoming $3 billion share repurchases, Abbott could be a good pick for healthcare investors at its current trading price.

Anh HOANG has no position in any stocks mentioned. The Motley Fool recommends Johnson & Johnson. The Motley Fool owns shares of Johnson & Johnson. Anh is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

The article This Healthcare Giant is Definitely a Great Buy Now originally appeared on Fool.com is written by Anh HOANG.

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