Wednesday, April 15, 2020

Procter & Gamble (PG) Raises Dividends by 6%

The Procter & Gamble Company (PG) provides branded consumer packaged goods to consumers in North and Latin America, Europe, the Asia Pacific, Greater China, India, the Middle East, and Africa. It operates in five segments: Beauty; Grooming; Health Care; Fabric & Home Care; and Baby, Feminine & Family Care.

The company increased its quarterly dividend by 6% to 79.07 cents/share. This dividend increase will mark the 64th consecutive year that this dividend king has increased its dividend. The new quarterly dividend of 79.07 cents/share is almost exactly 6% higher from the prior dividend of 74.59 cents/share. Fractions make it possible to get even dividend raises on a percentage basis.

During the past decade, the company has managed to increase dividends at an annualized rate of 5.60%.

Source: Press Release

This is the second dividend increase for me today, after dividend king Johnson & Johnson (JNJ) hiked distributions by 6.30%. Both companies are dividend kings, and there are only 28 such companies in the US.

This is also the 130th consecutive year that P&G has paid a dividend since its incorporation in 1890. The dividend demonstrates the company's commitment to rewarding long-term shareholders with cash dividends. The track record is undeniably a testament to the resilience of the P&G's business model, and the fact that it is relatively immune from recessions.

Procter & Gamble also moved its earnings release to April 17th. The company is expected to generate $4.96/share in earnings in 2020, however this could be subject to a downward revision. That being said, the core business is very stable, which means that long-term earnings power should not be affected. Based on forward earnings, it appears that the forward dividend payout ratio is a little lower than 64%, which means that the dividend is sustainable.

While I applaud this dividend hike, I do not like the fact that earnings per share did not go anywhere since hitting a high of $4.26/share in 2009. This puts a limit to dividend growth. As a result, I have mostly been a holder of the stock, and haven't added to my position since perhaps the first half of the 2010s.

At the current price of $120.96/share, the stock seems overvalued at 24.40 times forward earnings. P&G may be worth a second look on dips below $99/share.

Relevant Articles:

- Dividend Kings List for 2020
Johnson & Johnson (JNJ) Hikes Dividends By 6.30%
Procter & Gamble Raises Dividends for 61st Consecutive Year in a Row
Lindsay Corporation Hikes Dividends

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