Although General Electric (NYSE:GE) has raised its dividend every year since 2010, the industrial giant is in the midst of a major restructuring that could impact its shareholder rewards program moving forward. As a result, our Foolish contributors think Lowe's (NYSE:LOW), Proctor & Gamble (NYSE:PG), and Johnson & Johnson (NYSE:JNJ) are better dividend stocks than General Electric right now. Here's why.
Andres Cardenal: Dividends don't just provide cash payments for investors, dividend trajectory says a lot about the health of a business, since a company needs to produce consistently growing cash flows through good and bad economic times if it's going to reward investors with sustainable dividend growth over the years. Although Lowe's has a modest dividend yield of only 1.5% at current prices, the company has a truly impeccable track record of dividend payments over the decades.
Lowe's has paid uninterrupted quarterly dividends since becoming a public company in 1961, and the home improvement retailer has increased those dividends over the last 53 consecutive years. The company is clearly much exposed to housing activity, yet Lowe's even managed to increased dividends by 6.25% in 2009, when the housing market was in the midst of a devastating crisis. Over the last five years, dividend growth has gained steam; what was a quarterly dividend of $0.11 per share in 2011 has more than doubled to $0.28 per share.
This impressive track record of dividend growth is built on solid fundamentals. Home Depot and Lowe's are the two leading players in the U.S. home improvement market, and both companies benefit from brand recognition, conveniently located stores, and scale advantages. These competitive strengths have allowed Lowe's to deliver growing dividends through the ups and downs in the housing market, and everything indicates the company will continue producing consistent dividend growth over years to come.
Daniel Miller: Finding a dividend that's arguably more attractive than General Electric's is no easy task. In fact, GE remains one of my favorite industrial dividend stocks. However, one that can rival GE, and is arguably more attractive, is Proctor & Gamble. For what it's worth, the dividends pay out a similar yield, with P&G having the slight advantage at about 3.3%, while GE sits at roughly 3%. Both are valuable dividends with upside amid their respective turnaround efforts, but P&G might have the easier path during the near term.
While GE is refocusing on its industrial roots, the near-term drag in energy markets will slightly hinder the company's earnings; P&G is also in the midst of a turnaround, but it shouldn't face headwinds to the degree GE will. Further, P&G should be able to drive stronger earnings growth after it divested a number of brands. Consider that before P&G began selling off assets and axing part of its portfolio, it had 166 brands, which has now been narrowed down to 65.
That slashing of brands helped the company generate 9% core earnings growth per share during the recent second quarter, and even better constant-currency core earnings-per-share growth of 21%, when excluding for the harsh impact of the strong dollar. The company's core gross margin, excluding FX, jumped 290 basis points, and its core operating margin jumped 390 basis points.
Ultimately, P&G operates with a portfolio of leading brands across market segments that are consumer necessities, and the company's focus on driving $10 billion in cost-savings all while improving organic sales growth makes it a safe dividend stock with near-term upside.
George Budwell: For my money, Johnson & Johnson is simply one of the best dividend stocks to have in your portfolio. After all, this diversified healthcare company is recognized as a so-called Dividend Aristocrat because of its astonishing 53-year history of consecutive dividend increases. And if that wasn't enough, J&J also sports a AAA-rated balance sheet, a reasonable debt-to-equity ratio of 27.9%, free cash flows in excess of $18 billion over the last year, and a trailing-12-month payout ratio of only 53%, according to data provided by S&P Global Market Intelligence. In short, J&J's reasonable dividend yield of 2.8% looks sustainable for the long term.
While J&J's strong fundamentals are certainly impressive, I think investors also need to understand that the company's research productivity has actually outpaced all of its peers over the last six years running -- leading to the launch of several important new products like blood-cancer treatment Imbruvica and prostate cancer drug Zytiga.
The bottom line is, J&J's keen ability to identify promising experimental compounds early in their development has allowed the company to avoid the dangers associated with high-dollar mergers and acquisitions. So, with its rock-solid balance sheet, strong free cash flows, and top-notch pharma pipeline, I think J&J is definitely a dividend stock worth considering.
Andrés Cardenal has no position in any stocks mentioned. Dan Caplinger has no position in any stocks mentioned. George Budwell has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Johnson & Johnson. The Motley Fool owns shares of General Electric Company. The Motley Fool recommends Procter & Gamble. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.