The Battle of the Consumer Dividend Stocks – March 2018

The market is actually down now, year-to-date.  Luckily, it’s not just one company here or there, that is bringing the whole ship south.  Instead, there are a vast number of companies that are seeing their price movements turn downward, unlocking value in the market place.  As dividend investors, this is news that we all love to see.  When there are macro-events in the economy, such as tariffs, trade wars, interest rate movements and technology enhancements – this usually leads me to go into one direction, when evaluating what dividend stock to buy.  The industry that has shown signs of value, for the price, is the consumer industry!  I want to do a comparison of a few stocks within that industry.

The Consumer Dividend Stocks

Since the stock market has dropped over 3% year-to-date and I had a consumer stock in my March Dividend Stock Watch List, I thought now is a good time to really hone in on the dividend aristocrats in that industry and see where they stand during this downturn.  I will keep this to three stocks that most families use on a daily basis.  I want to focus on three companies, whose name we see every where, at one place or another in the house – bathroom, closet, cupboard, you name it.  Now, since we are dividend investors, I want to make sure (for this analysis) that they are a aividend aristocrat (i.e. increasing their dividend for 25+ years).  Three companies that I will evaluate together are Kimberly-Clark (KMB), Johnson & Johnson (JNJ) and Procter & Gamble (PG).  Below their logos are brief descriptions on the brands that they have, that we all have owned or currently own in our house.

1.) Kimberly-Clark (KMB) Brands Include: Huggies, Pull-ups, Kleenex, Cottonelle, Scott, Viva, Kotex, KMB Professional

2.) Johnson & Johnson (JNJ) Brands Include: Johnson’s Baby, Aveeno, Neutrogena, Rogaine, Band-Aid, Neosporin, Motrin, Tylenol, Benedryl, Listerine

3.) Procter & Gamble (PG) Brands Include: Always, Ariel, Bounty, Charmin, Crest, Dawn, Downy, Febreze, Gain, Gillette, Head & Shoulders, Olay, Oral-B, Pampers, Tide, Tampax, Scope, Puffs, Ivory, Old Spice

The consumer dividend stocks industry holds some of the most powerful and iconic brands known to most families.  I don’t think with the recent events in our economy that their products will cease to exist any time soon.  Given the number of events occurring, I always think that owning a few of these consumer dividend stocks is a great way to go, which is evident by our Top 5 Foundation Stocks article, which houses two of the three names listed above.

Consumer dividend stock analysis

Now, to evaluate the consumer dividend stocks listed above, I want to place them through our Dividend Diplomats’ Stock Screener and focus on these attributes: Price to Earnings (P/E) based on analyst expectations of earnings, Payout Ratio, 5-year dividend growth rate and # of years of dividend increases.  The stock price I will be using in this article will be based on the March 23rd stock market close.  Time to see which consumer dividend stock is the most ripe!

1.) Price to Earnings (P/E) Ratio: Wow.  We all know we love the P/E ratio below 18, if we can.  Looks like PG is on the border, with JNJ & KMB definitely below it, based on forward earnings.  KMB wins this one, at below 15.

2.) Dividend YIeld: All are very solid here.  However, my portfolio currently yields over 3% and I would like to maintain that if I can.  Therefore, PG & KMB are the better of the 3.  However, KMB, similar to the P/E ratio, wins this one, as they edge out PG by 19 basis points!  It may not seem like a lot, but that’s a huge difference.

3.) Payout Ratio: Another very critical metric.  We love to see below 60%.  PG has been trying to right their “ship” for the last few years and I do believe that their payout ratio will get better.  However, KMB & JNJ win this one, and JNJ has the lowest payout ratio amongst the three.

4.) Dividend Growth Rate (DGR):  The power of the DGR is real I tell you!  If you are yielding lower, you should have a higher growth rate.  Therefore, JNJ falls in line with those expectations, as they have the lowest yield, but the highest 5-year average growth rate.  In fact, I would have expected KMB’s to be the lowest, but they are actually higher than PG’s.  I will mention that KMB increased their dividend earlier this year and it was only 3%, with PG increasing 3% in 2017 and JNJ increasing 5% in 2017.  Therefore, this is a mixed bag.  However, JNJ does win this round, though it’s not as clear.

5.) Dividend Increase History: Well, all 3 are dividend aristocrats, but for how long?  This is very funny, and the range is 45-60 years consecutively and all are winners in this scenario.  You cannot go wrong.

Consumer Dividend Stocks Conclusion

Very interest, indeed.  I currently own PG and JNJ and do not own KMB.  However, KMB is the one sporting the best characteristics, I would say, overall.  They have a better yield than PG, with a better 5-year dividend growth, showing more room to grow as well.  The downside here is that their brand portfolio, in my opinion, isn’t nearly as large as PGs or JNJs.  JNJ’s stock price and yield is not exactly where I’d like it to be, yet.  If JNJ had over a 3% yield, I think we would be having a different discussion here.  Further, owning all 3 is never a bad thing, either!

I am not exactly sure what to do, as I do like all 3 listed above.  I believe PG’s and JNJ’s dividend growth to be at or better than prior year (3% & 5%, respectively), which would change things; and April is the month they announce their dividend announcement, as well!  Therefore, we should stay tuned to what those two dividend Goliath’s do.

What do you see?  What would your preference be in the consumer dividend stocks arena?  Who wins above, in your opinion?  Please share your thoughts and feelings below, hoping that we receive a good mix of responses with their rationale, as well!  Thank you again for reading, good luck and happy investing!


25 thoughts on “The Battle of the Consumer Dividend Stocks – March 2018

  1. Having sizable positions in JNJ and PG, I will continue to hold for the long term. I have a smallish position in KMB established years ago, but the price took off and I never added to it. KMB has been on my radar recently for the reasons you mention. I’m taking my time with purchases in this market not knowing exactly where it’s going. Have added to D several times and O once so far this year. Would like to put some new money in another sector and KMB may be next. Thanks guys. This is an excellent and timely post. Tom

    • Tom –

      Very good on owning JNJ & PG. And yep to the D and O. The market has still been interesting for the last 2 days and the stocks are still very promising on price, big tech was bringing down the market today. Big decisions, and luckily we are in a position to make one.


  2. I don’t own any of those three and it really is quite a battle in deciding which one. As of now, PG and PEP have floated to the top of my list as I am preparing to pull the trigger. Those are two stocks I would love to have in my portfolio. Out of the three you mentioned, PG would be my top with JNJ my close second as they are giants in the consumer sector. In the best of all worlds, owning all three would be awesome! Thanks for this post and your analysis Lanny. 🙂

    • MDD –

      PEP is awesome if you can grab them at the right price. It’s been SO long since I even have been able to consider PEP, and I know that stock is on Bert’s list, no doubt. I agree – I think PG and JNJ have much better products than KMB, with more products they service, as well. What a great time to be a dividend investor.


  3. Hard to choose just one. All quality and I currently down own any. Although they are all on my watch list for a while now. No capital now, but hope to maybe pick up one sometime while the market is down. Unless a better opportunity presents itself.

  4. I like to spread my investments across companies like these (if you have low commissions). This article is a great argument for that strategy! KMB’s share price has taken a hit in the last year, but I still love having it in my portfolio. I would rather bet that people will still use all these products in 30 years, so I’ll keep adding to all three of these equally. PG’s dividend growth rate is a bit low for me, but I would still be happy with a 4% raise every year.

    • Dozer –

      I think you said it best – if you have low commissions – not a bad move to add to all 3! I agree on the longevity – I do not believe they are going anywhere, and would say we are in pretty damn good shape going forward.


  5. Lanny,

    Both PG and KMB are new positions for me in recent weeks and at current prices, I will continue to build both of my positions (just added a few more shares of KMB last Friday). JNJ was not on my radar, but after reading your post, I may look a little closer. It is nice to finally see some of the aristocrats trade at more favorable valuations.



    • PIV –

      Thanks for the comment. Congratulations on those positions, by the way. They are solid foundation stocks and you did make some well timed purchases, congrats and jealous.

      It is about damn time we have a chance to re-look at the aristocrat group, it’s been far, far too long.


  6. wow nice breakdown. Didnt realize how close they all are. I think I would go with proctor and gamble. There are in this restructuring phase and the stock is valued higher p/e than the others. They have the longest dividend history and I use their products the most. Their dividend growth has nt been that lately but they will be back.


  7. Consumer stocks are my largest overall holdings and my favorite sector to invest for the long haul. No secret I like all three names mentioned pretty equally these days. Probably doesn’t help you make a choice between the three but I guess that just shows my affinity for these names and the sector in general. That being said… if I had to pick one I’d go with JNJ. Consumer play, health play, pharma play all rolled into one.

  8. Hey Lanny,

    owning all three wouldn’t be a mistake – no doubt about that. Unfortunately none of them is in my portfolio yet. Missed the opportunities, but JNJ and PG will end up in my Lonestar Freedom Fund, it’s a question of time.

    Right now, i’d go with P&G. Really like their brand portfolio and dividend history. They seem to be in a restructuring process and the yield of 3,62% looks solid. JNJ is “the” classic dividend stock, but as you said, a starting yield close to 3% would be better.

    Besides these three i think that PepsiCo is attractively valued after the price decline. The yield climbed above 3% again and i think about adding to my position.


  9. I agree pretty good prices on all three of these. I’ve been eyeing PG myself. Love all the brands they offer. I wish JNJ yield was just a bit higher, but such a strong company no doubt!

  10. exelent list you got thete lanny. Own JNJ and PG and would love to increase them 🙂 I would suggest you to just go for it with these two. KMB is a good branded company but hate their weak balance. As you probably noticed I have issues for low equity 😉 Either way I think that neither of them is a miss in L/T perspective 🙂 Good luck witg your purchases.

  11. It looks like all 3 stocks have a good upside after the recent sell-off.

    For me, JNJ is the clear winner because it is not only a consumer stock but also a medical device and pharmaceutical stock as well.

    Also, JNJ is a much larger company with a $345 Billion market cap, which is larger than KMB and PG combined.

    JNJ’s dividend yield is smaller than the other 2, but only by 1%.

  12. Interesting post! I own all three of these stocks and have been averaging down in both PG and KMB during the two quarters. If JNJ continues down a bit I will probably buy some more as well.

  13. Hi Lanny, nice analysis and I agree based on that info, KMB is the best choice.

    BTW, I love that you posted on the consumer segment of the market! This is my favourite. I only hold a few consumer brands in direct shares but I’m keeping an eye on my consumer brands watchlist every month!

  14. Although JNJ has the lowest yield of the three, I think it also has the widest moat and the best brands. Buying JNJ at close to a 15 forward P/E, a month before the annual dividend hike, is very attractive. I doubled my position earlier this month.

    CLX, which I don’t own, also could be worth a look after a recent 14% dividend hike.

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