Dividend Increase: Proctor & Gamble PG 2018

PG’s dividend increase for 2018 was $0.0276, bringing the quarterly dividend to $0.7172 from last years $0.6896. Good for a 4% YOY change. This brings the yield to 3.41% based on the $84.25 closing price. This increase beats my projected increase $0.0029 projected increase or 0.42% for the year.

PG Dividend History:

PG has increased it’s dividend for 61 straight years. As a dividend payer, it’s at the top of the food chain as far as the aristocrats are concerned. However in recent years, the rate of the increase has slowed, barely keeping pace with my conservative long term inflation rate of 4%. However, going back to 2003, the dividend has grown at a rate of 8.02%, not bad for rewarding long term investors. Still, with the recent slowdown in the dividend growth, the last 15 years has rewarded investors by growing the dividend a total of 215%.

PG vs S&P500:

Coinciding with the recent 3 years of slow dividend growth, PG also underperformed the S&P500. The few years in particular has seen PG trail the S&P500 as it has been stuck in the 80’s pricing. A strong dollar and pricing from generics has hurt earnings. However the company has sold off product lines in an effort to get back to stronger growth.

PG Key Stats:

Market Cap: $209 Billion

PE Ratio: 22.96

Beta: 0.28

Dividend Yield 3.41%

Profit Margin: 14.59%

Total Cash: 11.85 Billion

Total Debt: 31.29 Billion

Payout Ratio: 75.91%

With low earnings growth and a payout ratio of 75%, we can see why the dividend growth has been muted in recent years. However, looking at the PE ratio in a market with lofty valuations, the PE for PG is actually respectable in this gravity defying market.

Conclusion:

If I was adding money in this market which has become tough to find value, PG actually looks respectable as a buy. However, I can’t help but feel like the market is due for some sort of pull back. While PG trades at a decent multiple in this market where you could do much worse, I would hold off on PG at the moment and wait for further pullback. Around the $80 price (or even $79), I’m having a field day, but at todays price of 84, the stock is kind of in no mans land, trading in the middle of a range it’s been stuck in for a while. Things that can help earning growth for PG would be a weakening dollars, which hasn’t happened stubbornly. If you’re a super long term holder like me, there are no worries. Just collect your decent yield and wait for the growth to come back. For someone looking to open a new position, hold off for the time being.

Value of $10,000 Long Term

On 1/2/2008, PG closed at $72.31 per share.  A $10,000 investment would have purchased 138 shares (rounded down).  As of 9/17/2018, the closing price of PG sits at $84.25, meaning your initial $10,000 would be worth $11,626.50 or a 16.25%.  This is a sad return.

If we factor in dividends into the equation, during the above time frame, we would have collected a total of $3478.318 in dividends. or 34.78% of our initial investment. You would have actually collected more in dividends than you experienced in capital appreciation.

Looking at total return when factoring in dividends, we arrive at a total return of 51.04%.  The dividends equate for the majority of our return in the case of PG or 68% of the return to be specific.  Looking at the concept of yield on cost our current annual dividend produces a yield on cost of 3.92%.

Certainly not the most exciting numbers to look at, but in the case of PG, the dividend generates a decent dividend yield while the company tries to turn the ship around.

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