Dividend Stocks: Procter & Gamble

dividend stocks Procter & GambleOne of the nation’s oldest company’s has been a good dividend stock candidate for years and is still one today. This company has increased its dividend for 54 consecutive years. That’s a remarkable streak considering the number of recessions in the United States economy over that time period. If you think that’s impressive, consider the fact that the company has issued a distribution to shareholders for 120 years.

Proctor & Gamble Stock Analysis

The company in question is Procter & Gamble (PG).

Procter & Gamble is the world’s largest consumer products manufacturer. You name it and Procter & Gamble makes it from household cleaning products to batteries and toothpaste. The company is an earnings juggernaut.

Procter & Gamble owns Bounty, Gillette, Braun, Head & Shoulders, Oral-B, Tide, Pampers, Pringles, Dawn, Downy, Duracell, Gain, Fusion, Pantene, Crest, Glade, Mr. Clean, Old Spice, Pepto Bismol, Scope, Secret, Puffs, Tampax, Vicks, Ivory, Iams, Wella, and Joy. Those are just a few of Procter & Gamble’s biggest brands.

The company has generated nearly $80 billion dollars in sales each of the past three years. Net income has come in over $12 billion dollars each of the past three years as well. Procter & Gamble has a $170 billion dollar market cap. Gross margins came in at 51.3% which is slightly lower than their levels the previous year. Operating margins were down to 19.7% for the first time in four years.

Shares currently trade at 2.7 times book value, 2.3 times sales, and 16.6 times earnings, and 13.6 times free cash flow. Shares trade at 13.7 times forward earnings. All of these ratios are lower than the industry average except for price to sales.  Growth was up 1.5% last quarter which is encouraging after two years of negative revenue growth.

Proctor & Gamble Dividend

Procter & Gamble currently pays out $1.93 per share in the form of dividends which equates to a 3.2% dividend. A yield over 3% is always attractive when dividend investing. This is slightly higher than the historical yield of 2.80%. Procter & Gamble has increased its dividend 11.5% per annum over the past five years. The dividend payout rate is 51% of earnings. Procter & Gamble is a cash cow. The company generated $13.5 billion dollars in free cash flow last year which is more than enough to sustain the dividend.

Procter & Gamble is one of the largest holdings of Warren Buffett’s Berkshire Hathaway. Warren Buffett has been a long time fan of the company. He trimmed his position last year to raise some cash to make a few deals but Berkshire still owns over 76 million shares that have a combined net worth of $4.6 billion dollars. That’s about 8.7% of Buffett’s portfolio.

If the stock is good enough for Buffett then it should be good enough for you too.

Comments

  1. Good analysis Mark. PG is one of the most stable dividend grower out there, and I don’t think that will change anytime soon.

  2. I always knew that Proctor and Gamble was a powerhouse, but I did not realize how much revenue they generated. This is incredible!

  3. avatar Jenna says:

    Thanks for sharing your PG insights. I just wanted to let you know that Adaptu is running a Get Talking Challenge and thought you might be interested in participating. For more information check out or shoot me an email.

  4. Procter and Gamble is one of those great companies that sell a product that people need regardless of their economic conditions. As a result, population grows, income grows. They also pay a nice dividend that they can support going forward!

  5. A great company producing wonderful products that people need. One of my core holdings for the long haul!

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