Consumer products companies have been among the most rewarding dividend stocks to own over long periods of time.

Take industry behemoths Procter & Gamble (PG) and Colgate-Palmolive (CL) as prime examples.

P&G has paid a dividend for 127 years, and has increased its dividend for 60 years in a row.

Colgate-Palmolive began paying dividends to shareholders all the way back in 1895. It has increased its dividend for 54 consecutive years.

Both companies are on the list of Dividend Aristocrats, a group of companies in the S&P 500 that have raised dividends for 25+ years.

Not only that, but they are also members of the Dividend Kings, an even more exclusive group of companies with 50+ years of consecutive dividend increases.

There are just 19 Dividend Kings. You can see the entire list of Dividend Kings here.

This article will compare-and-contrast these two Dividend Kings.

Business Overview

Winner: P&G

P&G and Colgate-Palmolive are both giant consumer products companies.

P&G operates more than 60 brands, spread across 10 product categories.

Source: Company Fact Sheet, page 2

P&G has repositioned itself, after a long divestment process. In 2014, P&G sold its Duracell battery business to Warren Buffett’s Berkshire Hathaway (BRK-A) (BRK-B) for $4.7 billion.

The following year, it sold a portfolio of 43 beauty brands to Coty (COTY) for $12.5 billion.

Colgate-Palmolive also has a large product portfolio, but it is more focused. Most of the company’s operations center on three key areas—oral health, household cleaners, and animal health products.

Some of its core brands include Colgate, Palmolive, Softsoap, Irish Spring, Tom’s of Maine, Ajax, and Hill’s.

Colgate-Palmolive has a strong grip on oral health products. It claims massive share in global toothpaste sales.

Source: 2017 CAGNY Presentation, page 23

But P&G has a big structural advantage right now—its smaller international presence.

P&G generates roughly 44% of its sales from North America.

By contrast, Colgate-Palmolive generates just 21% of its sales from North America. As such, it is much more exposed to the strong U.S. dollar than P&G.

The strong dollar has had a severe impact on revenue growth for companies with large overseas businesses, and Colgate-Palmolive has been one of the hardest-hit in the consumer goods sector.

Source: 2017 CAGNY Presentation, page 13

For example, Colgate-Palmolive’s net sales fell 4.5% last quarter, while P&G posted flat sales in its most recent quarter.

Another reason why P&G’s business model is stronger right now, is because of its asset sales.

The company has shed dozens of low-growth brands, and has reaped massive productivity improvements as a result.

Source: 2017 CAGNY Presentation, page 13

Over the past five years, P&G generated $10 billion of cost savings, and it believes there is potential for another $10 billion in cost cuts over the next five years.

These sharp cost reductions have had a significant impact on P&G’s margins.

In fiscal 2016, operating margin based on continuing operations expanded by 370 basis points

Thanks to its massive portfolio transformation, P&G is a much slimmer, more streamlined company.

This has led to stronger earnings growth in recent periods. Cost cuts and gains from divestments helped P&G’s diluted earnings-per-share increase 51% in 2016.

Growth Prospects

Winner: Colgate-Palmolive

Colgate-Palmolive’s huge international footprint is a disadvantage right now, but will likely be a benefit over the long-term.

Thanks to P&G’s portfolio restructuring and its lower level of currency risk, it has posted much better growth rates over the past year.

Source: 2017 CAGNY Presentation, page 3

But it is important to remember that currency movements can be cyclical. Volatile swings in the U.S. dollar usually revert to the mean over the long-term.

Colgate-Palmolive’s huge international footprint is a disadvantage right now, but will likely be a benefit over the long-term.

In 2016, Colgate-Palmolive’s organic revenue (excluding foreign exchange) increased 5% in the international markets, led by 10% growth in Latin America, 5.5% in Africa, and 2% in Asia.

These growth rates solidly exceeded North America, which grew organic revenue by 1.5% for the year.

Colgate-Palmolive’s lead in China and India should be a long-term tailwind, for multiple reasons.

First, emerging markets are more receptive to price hikes.

This is a key growth lever for Colgate-Palmolive. Price increases boosted its revenue by 2.5% last year. P&G’s pricing was flat in the past two quarters combined.

Going forward, China and India are extremely attractive for growth, because they have populations of 1 billion and expanding middle classes.

Not only that, but there is huge growth potential in Colgate-Palmolive’s core toothpaste business. Toothpaste consumption is very low in many parts of the world, including China and India.

Source: 2017 CAGNY Presentation, page 45

P&G’s huge cost-cutting and share repurchases caused a large windfall last year. And it has been shielded from the effects of the strong U.S. dollar.

But it has less exposure to high-growth emerging markets than Colgate-Palmolive. As a result, Colgate-Palmolive could generate stronger long-term growth.

Dividends

Winner: P&G

Both stocks are similarly valued. On a forward basis, P&G and Colgate-Palmolive trade for price-to-earnings ratios of 21 and 23, respectively.

Each stock appears to be fairly valued, so there is not much difference in terms of valuation.

However, they do differ in terms of dividends: Colgate-Palmolive has a current yield of 2.1%. This is only an average yield.

The S&P 500 Index on average yields about 2%.

Meanwhile, P&G stock has a 3% dividend yield. It provides about 43% more dividend income than buying Colgate-Palmolive stock right now.

It could be possible for Colgate-Palmolive to catch up over time, if it maintains a significantly higher dividend growth rate than P&G.

But this is not likely. Their dividend growth is very similar.

Over the past five years, P&G and Colgate-Palmolive have increased their dividends by 4% and 5%, respectively.

As a result, P&G is a clear winner in dividends. This gives P&G a significant advantage, since dividends are a big reason to consider buying these stocks.

Final Thoughts

Both P&G and Colgate-Palmolive have long histories of paying dividends, and raising their dividend payouts each year.

As a result, they are both worthwhile stocks for a dividend growth portfolio.

However, this may not be a great time to buy Colgate-Palmolive. It trades for a higher valuation than P&G, with a much lower dividend yield as well.

As a result, P&G looks to be the better dividend stock to buy right now.P&G outranks Colgate-Palmolive using The 8 Rules of Dividend Investing for the reasons discussed in this article.