Although the name is still iconic, General Electric Company (NYSE:GE) has been going through a very difficult period. The businesses underpinning the industrial giant aren't what they were just a couple of years ago, and the change isn't over yet. Most investors would be better off avoiding it. The Procter & Gamble Company (NYSE:PG), on the other hand, is offering investors a large yield and boasts a still-robust business. Here's why most dividend investors would be better off forgetting about GE and buying P&G.

An existential crisis

General Electric's problems date back to Jack Welch, which to some might sound like heresy. Although lauded as a management genius, he allowed the diversified industrial company to stray too far into the finance business. When the deep 2007 to 2009 recession hit, after Welch had passed the reins on to a new CEO, the finance arm's troubles led to a dividend cut and a government bailout.

A woman drawing a risk versus reward graph

Image source: Getty Images.

General Electric quickly got to work rethinking its portfolio. The conglomerate shed non-core assets (like a television network) and trimmed the size of its finance business. Although the top and bottom lines were still in flux because of the corporate makeover, it appeared that the company was going in the right direction. Note that dividends starting to grow again in 2011.   

But the positive outlook for the future died in late 2017, when a new CEO was named. John Flannery quickly reined in expectations and cut the dividend by 50%. More notable, however, he announced that the company was undertaking a portfolio review to improve long-term performance and positioning...and that nothing was off the table. GE is set to make huge changes, including jettisoning large businesses so it can refocus on a smaller core.

PG Dividend Per Share (Annual) Chart

PG Dividend Per Share (Annual) data by YCharts.

Although there appears to be material recovery potential at GE, it is really a special situation stock at this point. Most investors would be better off avoiding it as it works through what amounts to a massive existential crisis -- one that's likely to result in further changes to the dividend once the dust settles.

A better option

The uncertainty at GE is a good reason to be worried about owning the stock, but the bigger issue is the fact that it's making massive changes to its business. Even an educated guess about what the future holds would be hard to make at this point in time. That's a risk not worth taking for most investors, which is why Procter & Gamble and its 3.7% dividend yield is a better option.

Like GE today, Procter & Gamble went through a huge portfolio overhaul not too long ago. However, this wasn't a breakup of the company as much as a trimming of the fat. The businesses this consumer-product giant jettisoned were smaller and lower margined than what it retained. This helps explain why revenues fell each year between 2012 and 2017, while the company's operating margin improved from 17.1% to 21.5%.   

Notably, P&G was able to continue increasing its dividend every year as it streamlined its business. The annual dividend streak is now up to an incredible 62 years and counting. That's a huge statement about the company's inherent financial strength, commitment to shareholders, and expectations for the future. 

The trouble today, though, is that consumer products companies are dealing with changing customer desires. That's one of the key reasons Procter & Gamble's yield is at the high end of its historic range. In fact, the yield is roughly as high as it was during the depths of the 2007 to 2009 recession. It looks like a good opportunity for income investors to buy an iconic company.

PG Dividend Yield (TTM) Chart

PG Dividend Yield (TTM) data by YCharts.

The important takeaway, here, is that changes in customer buying habits may increase the uncertainty at P&G, but I don't think it materially increases the risk. P&G has a long and successful history of innovation and change; you don't get to 62 consecutive annual dividend hikes by accident, or without going through some difficult periods. It has, for example, been introducing "natural" products to adjust to customer's desires. And it has also been more aggressive in taking on new competitors, including internet-focused razor companies in its key Gillette business.

P&G is changing with the times and has a history of success that suggests it will, eventually, figure out how to succeed this time, too. In fact, results are starting to look encouraging. Revenues, for example, have grown year over year in each of the last three quarters. That's the first step toward a brighter future, since it is an indication that Procter & Gamble's business shifts are gaining traction.   

That's not to suggest that there's no risk here -- P&G is still a work in progress in some ways since the internet is materially altering the way customers interact with companies. But it is clearly further along than GE, and its top-line upturn is a positive sign. Add in a low level of debt, with long-term debt at roughly 30% of the capital structure, and P&G easily looks financially strong enough to keep supporting both its portfolio tinkering (the heavy lifting has been done already) and the dividend.     

Don't take on more than you need to

General Electric's portfolio overhaul is huge and still in progress. It is not the same company it was just a few years ago, and it will be a very different company again a few years from today. There's sizable turnaround potential, but only for investors willing to stomach the risk of a special situation stock. The dividend, meanwhile, has already proven to be at risk with no certainty that it will survive intact as the industrial giant moves into a new phase of its corporate life.

This is why most investors, notably those looking for a reliable dividend stock, would be better off buying Procter & Gamble today. It has already been through a major portfolio overhaul without a major impact on its dividend, and it is addressing current industry shifts with new products and a more aggressive defense of its core brands (notably Gillette). A resumption in sales growth in recent quarters is an initial indication of success that investors don't appear to be recognizing based on the historically high yield. Now looks like a good time for dividend investors to buy P&G.

Reuben Gregg Brewer owns shares of Procter & Gamble. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.