For decades, Procter & Gamble (NYSE:PG) and Kimberly-Clark (NYSE:KMB) have served as reliable sources of bountiful and steadily growing dividends for investors. Incredibly, these consumer goods giants have increased their cash payouts to shareholders for 62 and 47 consecutive years, respectively. Both stocks continue to pay out hefty sums to investors, with Procter & Gamble currently yielding 2.8% and Kimberly-Clark 3.4%.

But which of these dividend dynamos is the better buy? Let's find out.

Check out the latest earnings call transcripts for Procter & Gamble and Kimberly-Clark.

The word dividends written on a piece of paper resting on top of $100 bills

Image source: Getty Images.

Competitive position

Kimberly-Clark owns popular brands such as Kleenex, Huggies, and Kotex. Procter & Gamble possesses an even broader collection of billion-dollar brands. While it, too, has built sizable businesses in areas such as tissues, diapers, and feminine products, P&G also has leadership positions in several other massive markets. These include grooming, detergents, hair care, and oral care, with brands like Gillette, Tide, Head & Shoulders, and Oral-B. 

Moreover, P&G has a market-share advantage in important categories such as diapers, a market poised to grow to more than $78 billion globally by 2025, according to Allied Market Research. P&G's Pampers brand holds an approximate 44% share of the U.S. diaper market -- the largest diaper market in the world -- compared to about 37% for Kimberly Clark's Huggies brand. 

All told, P&G's broader product lineup and market-share leadership in several important categories give it a stronger overall competitive position than Kimberly-Clark.

Advantage: Procter & Gamble

Financial fortitude

Let's now take a look at some key financial metrics to see how these two rivals stack up.

Metric

Procter & Gamble

Kimberly-Clark

Revenue

$66.9 billion 

$18.5 billion 

Operating income

$13.6 billion

$2.2 billion

Operating cash flow

$15.1 billion

$3.0 billion

Free cash flow

$11.5 billion

$2.1 billion

Cash

$12.1 billion 

$0.5 billion 

Debt

$33.6 billion

$7.5 billion

Data sources: Morningstar, Yahoo! Finance.

P&G is the more heavily indebted company, with $21.5 billion in net debt compared to $7 billion for Kimberly-Clark. That said, P&G's revenue, operating profit and cash flow, and free cash flow all dwarf those of its smaller rival. This should allow P&G to pay down its debt over time, while still rewarding investors with bountiful dividends and share repurchases. Thus, P&G has a clear edge in terms of financial strength.

Advantage: Procter & Gamble

Growth

P&G and Kimberly-Clark have found growth difficult to come by in recent years. Competition from e-commerce upstarts and lower-priced private-label brands remains an ongoing challenge for both companies. Additionally, rising costs for commodities like pulp and plastic have taken a toll on their profits, and the price increases they enacted to offset this margin pressure have weighed on their sales volumes.

In turn, Wall Street expects Kimberly-Clark's earnings per share to rise by less than 3% annually over the next five years, driven primarily by price increases and cost cuts. During the same period, P&G's EPS is projected to expand by more than 6% annually, fueled by low-single-digit sales growth and stock buybacks.

Neither company is likely to dazzle investors when it comes to growth in the coming years, but P&G has a slight edge here.

Advantage: Procter & Gamble

Valuation

Finally, let's review some stock valuation metrics, specifically the price-to-sales (P/S), price-to-free-cash-flow (P/FCF), and price-to-earnings (P/E) ratios.

Metric

Procter & Gamble

Kimberly-Clark

P/S

3.80 

2.22 

P/FCF

22.09 

19.59 

Forward P/E

21.34 

17.22 

Data sources: Morningstar, Yahoo! Finance.

Across all three metrics, Procter & Gamble's shares are significantly more expensive than Kimberly-Clark's. This is to be somewhat expected, given P&G's higher expected growth rates. Still, Kimberly-Clark's stock is currently priced lower by 42% based on sales, 11% based on free cash flow, and 19% based on expected earnings, making it the better bargain.

Advantage: Kimberly-Clark

The better buy is...

Kimberly-Clark's stock may be cheaper, but Procter & Gamble's stronger competitive position, greater financial strength, and superior growth prospects make it the better long-term investment.