Johnson & Johnson Is Becoming Two Companies. What Happens to My Stock?

“I do think the company is making it user-friendly in terms of the transaction,” said Mike Bailey, director of research at FBB Capital Partners. “So I think the next step is for investors to think, ‘Let me roll ahead the clock. I’m going to have these two companies—do I want to own both? Do I want to sell one of them?’ ”

The decision by J&J is hardly unique. Just this week,

General Electric

announced it will break apart into three public companies, with the three companies centered around aviation, healthcare and power.

For shareholders in J&J or any company going through a breakup, there are a lot of questions to think about. Here are some answers.

What happens to my shares?

Right now, not a lot. Because the breakup won’t happen overnight—rather, it’ll likely take a year or more, Mr. Bailey said—most investors can sit tight and plot their longer-term strategy.

“In the short term, it’s ‘hurry up and wait,’ ” Mr. Bailey said. “In theory, there’s nothing you have to do.”

What if I owned fractional shares?

“It’s no different than if you’re a whole shareholder,” said Jonathan Waite, senior equity analyst at Frost Investment Advisors. “Come the day they put as the ‘x’ date, you’ll have two companies in there.”

When it comes to planning strategy going forward, a lot of this depends on how many fractional shares you own, and in what company. For an investor building a very small portfolio primarily with fractional buys, the breakup could lead to greater diversification, Mr. Bailey said.

“In some ways, it complicates life: It adds another variable to that portfolio,” he said. “But on the flip side, it adds more diversification. Before, J&J was a basket of healthcare products. And now, you own a more traditional healthcare stock and now a consumer stock.”

What about my shares in the dividend reinvestment plan?

In the short term, nothing changes.

“They’re still paying the same amount, and I was pleased to hear that they’re going to maintain that same dividend payment,” Mr. Waite said. “That’s a good sign.”

But Mr. Waite also pointed out current J&J employees may have more specific questions as to how this split will affect people in different divisions within the future two companies.

“If you’re an employee and you have shares in that company—if you’re part of that consumer piece, especially—I think you have a lot of questions to be asking the powers-that-be,” he said.

What do I do come tax time?

J&J expects the move to be tax-free.

The only tax consequence an investor should expect would come from a sale is if they decide to unload one (or both) of the stocks they own. But for those who plan to keep the status quo, they shouldn’t expect any tax implications, Mr. Bailey said.

“For a buy-and-hold type of investor who wants to own a blue-chip company, you can just sit and wait,” Mr. Bailey said. “You had one company, and now you’ll have two.”

Write to Julia Carpenter at Julia.Carpenter@wsj.com