Wednesday, April 13, 2022

Procter & Gamble (PG) Raises Dividends For 66th Consecutive Year

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 5% to $0.9133/share. This dividend increase will mark the 66th consecutive year that this dividend king has increased its dividend. The new quarterly dividend of $0.9133/share is almost exactly 5% higher from the prior dividend of $0.8698/share. Fractions make it possible to get even dividend raises on a percentage basis. 

This dividend increase will mark the 66th consecutive year that P&G has increased its dividend and the 132nd consecutive year that P&G has paid a dividend since its incorporation in 1890. It reinforces our commitment to return cash to shareholders, many of whom rely on the steady, reliable income earned with their investment in P&G.

There are only 38 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.

Source: Press Release

During the past decade, the company has managed to increase dividends at an annualized rate of 5.20%.

The company is expected to generate $5.88/share in earnings in 2022. 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 at 62%, which means that the dividend is sustainable.

Earnings per share have increased from $3.66 in 2012 to $5.50 in 2021.

In the past decade, the dividend payout ratio increased from 58% in 2012 to 59% in 2021. A lower payout is always a plus, since it leaves room for consistent dividend growth minimizing the impact of short-term fluctuations in earnings.

The number of shares outstanding has been decreasing gradually over the past decade too.

It is interesting to look at the company's performance over the past decade for perspective. The stock sold for approximately $66/share a decade ago, and paid a quarterly dividend of 52.50 cents/share, for an annual dividend yield of 3.20%. 

Fast forward to today, and the company is paying a quarterly dividend of almost 91 cents/share, for a total yield on cost of 5.53%. If we take dividend reinvestment into consideration, a $1,000 investment ten years ago would be generating $74.60 in annual dividend income today.

At the current price of $159.01/share, the stock seems overvalued at 27.14 times forward earnings. The stock yields 2.30%. P&G may be worth a second look on dips below $120/share.

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