Tuesday, April 13, 2021

Procter & Gamble (PG) Increased Dividends by 10%

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 10% to 86.98 cents/share. This dividend increase will mark the 65th consecutive year that this dividend king has increased its dividend. The new quarterly dividend of 86.98 cents/share is almost exactly 10% higher from the prior dividend of 79.07 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 5.20%.



Source: Press Release

There are only 29 dividend kings in the US. Those are companies that have managed to increase their annual dividends every year for at least 50 years in a row.

This is also the 131st 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. Not even Covid-19 could disrupt the dividend growth for this dividend king!

The company is expected to generate $5.70/share in earnings in 2021. 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 61%, which means that the dividend is sustainable.

I applaud this dividend hike, which is surprising in its amount.

For a long time, I did not like the fact that earnings per share did not go anywhere since hitting a high of $4.26/share in 2009. This put a limit to dividend growth. As a result, I had mostly been a holder of the stock, and haven't added to my position since perhaps the first half of the 2010s. 

However, the company earned $4.96/share in 2020, and is projected to earn $5.70/share in 2021. It looks like a turnaround is in effect indeed, and long-term patient shareholders are now getting bigger dividend paychecks.

For reference, I have never in my life gotten a 10% raise from any job. Even if I worked 60 hours/week year-round, and worked weekends.

It is interesting to look at the company's performance over the past decade for perspective. The stock sold for approximately $60/share a decade ago, and paid a quarterly dividend of 48 cents/share, for an annual dividend yield of 3.20%. 

Fast forward to today, and the company is paying a quarterly dividend of almost 87 cents/share, for a total yield on cost of 5.80%. If we take dividend reinvestment into consideration, a $1,000 investment ten years ago would be generating $76.80 in annual dividend income today.



At the current price of $135.11/share, the stock seems overvalued at 24 times forward earnings. The stock yields 2.57%. P&G may be worth a second look on dips below $114/share.

3 comments:

  1. But...just look at the trend over the past decades....As a buy and hold investor who compounds their wealth by reinvesting all dividends over decades....I have watch my wealth grow. Patient investors can buy any time if they follow this method.

    ReplyDelete
    Replies
    1. Yep, it's a great company

      I've owned for over a decade, and I'm happy with the results

      Delete
  2. I buy anytime. As a buy and hold for decades investor who reinvests all dividends I am more than pleased to see my wealth compound by this method. if it is reliable and a good company just buy it and keep,it forever.

    ReplyDelete

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