There is no better, simpler, easier way to build wealth over the long term than buying and holding shares of great companies. While it can be challenging to find companies that can persist (let alone thrive) in the long run, they do exist.
Investors should consider the following two options: Johnson & Johnson (NYSE: JNJ) and Merck (NYSE: MRK). Shares of these two healthcare industry leaders have surged over the past six months, outperforming the broader market. They may or may not keep that momentum going this year, but it’s worth sticking around for the next two decades.
That’s why.
Johnson & Johnson and Merck & Co. are among the largest pharmaceutical companies on the market. The latter focuses on oncology and currently sells Keytruda, the world’s best-selling cancer drug. The drug is approved to treat more than a dozen cancers and continues to be developed for new indications, which should help keep its sales in the right direction as it passes the patent cliff in 2028.
Merck is also bracing for the loss of patent exclusivity on its most important products. It received approval for a subcutaneous version of Keytruda that is faster and easier to administer without compromising efficacy. It has also launched new products, including Winrevair, a treatment for pulmonary arterial hypertension, and Capvaxive, a pneumonia vaccine. Merck is well-positioned to overcome the challenges ahead and perform well long into the future.
The same is true for Johnson & Johnson. Even with the patent cliff and tariff threats it faced last year, Johnson & Johnson has been able to deliver stable revenue and profitability, thanks to its vast pharmaceutical portfolio and deep presence in the medical device market. There’s a reason Johnson & Johnson and Merck have excellent long-term track records. Although the past is no guarantee of future success, they still possess qualities that make them market leaders.
Dividend-paying stocks tend to outperform non-dividend-paying stocks over the long term. There are many reasons for this, one of which is that companies that are able to sustain a dividend program for a period of time almost always have a solid underlying business. That’s what we’re doing with Johnson & Johnson and Merck. Starting with the latter, it currently offers a forward yield of 3.1% and has increased its dividend payments by 94% over the past decade.
