Procter & Gamble Vs. Johnson & Johnson

For a dividend stock showdown, however, comparing each company’s P/E Ratio will help us identify which company is currently chearper compared to the other. The following chart shows a clear winner!

Winner: Johnson & Johnson

Dividend Payout Ratio (Stock Screener Metric #2)

The second metric of our dividend stock screener is the payout ratio. This metric assesses the safety of a company’s dividend. The goal of being a long term, buy and hold investor, is to build a dividend that will grow over time. After all, a company cannot payout more cash to shareholders than it earns in the long run.  That’s why constantly monitoring a company’s dividend payout ratio is so critical.

When reviewing a company’s dividend payout ratio, we like companies to have a dividend payout ratio of less than 60%. This leaves plenty of room for a company to continue paying, and growing, its dividend. In fact, we think a perfect dividend payout ratio is between 40%-60%! If it falls in that range, even better!

The following chart compares the dividend payout ratios for Procter & Gamble and Johnson & Johnson:

 

The results here are interesting. Johnson & Johnson has a perfect dividend payout ratio, falling in that 40%-60% range. Procter & Gamble’s payout ratio is just a hair above our 60% threshold. Overall, I’m not too concerned, as there is still plenty of room before the company’s dividend payout ratio exceeds 100%. However, when compared against each other, Johnson & Johnson’s perfect dividend payout ratio comes out on top!

Winner: Johnson & Johnson

Dividend Growth History (Stock Screener Metric #3)

Now, onto the dividend growth history. In this comparison, we want to compare the longevity of each company’s dividend increase and the company’s average dividend growth rate.

Don’t get me wrong, it is important for a company to increase its dividend. However, we also want to make sure the company is increasing its dividend at a rate greater than inflation. That way, our passive income stream will not lose purchasing power!

The chart below compares PG and JNJ’s 5-year average dividend growth rates and consecutive annual dividend increases.

Both companies are dividend kings, as we have mentioned several times throughout this article. That metric is considered even in my opinion. The dividend growth rate is much more fascinating. The table above clearly shows that JNJ has a higher average dividend growth rate. PG shareholders have been plagued with low dividend growth over the last few years.

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Disclaimer: I do not recommend any decision to the reader or any user, please consult your own research. Thank you.

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