Procter & Gamble (PG) Stock Analysis

It’s close to the middle of the month and the market has still been extremely volatile.  With that, I know that opportunities are out there, wonderful opportunities, especially dividend stocks that are aristocrats.  Yields are looking fairly unusually high for a few of the aristocrats that do not historically have them at these levels.  This makes us all extremely motivated and excited investors as our dividends are reinvested at better valuations and also opens up the table for buying potential!  With that, we will analyze one of the dividend aristocrats in Procter & Gamble or PG.

The Stock – Procter & Gamble (PG)

Procter & Gamble (PG) – Tide, Dawn, Gillette, Bounty, Luvs, Mr Clean, Cascade, Charmin… the list truly goes on, as we have seen when we analyze companies (such as Disney).  It’s phenomenal the products that they offer and how the every-day consumer will more than likely purchase these products – and in abundance, as well as throughout the year aka recurring customers and revenue.  Further, PG has increased dividends for… drum roll… over 61 years.  Read that again 61 gosh damn years!!  That is why I still will consider them as a foundation stock for a dividend growth investor and their portfolio.  I wonder why Bert didn’t want to include them as a stock that you should always buy when a good opportunity is there.   I am assuming that it was due to the 3% growth to the dividend this year, which yes – I too was alarmed by how small that was.  However – I did MUCH more digging on PG’s dividend history, say 25 years worth (yes, I am wild) and here is the chart:

pg 25 yrs


That there reads 25 years worth of dividend growth data and yes the average dividend growth rate for the last 25 years stands at 10%; with the last 4 years coming in at 7% or less.  They have recently begun cleaning their portfolio a bit to become more focused, as evidenced by their recent agreement to sell their beauty products line to Coty.  I believe that moves like these will increase margins to bring the growth to the dividend back to the historical record they have had in the 7-10% range.  How about them apples, Bert?  Kidding, kidding. 

PG – Dividend Diplomat Screener Analysis

Well, as of this writing on 9/12/15 – the stock is trading at $68.43.  Given that I purchased them a LONG time ago (18 months ago), I am down in share price approximately 9-10%, given my rule of thumb, I am very interesting in more of PG.  Using the dividend diplomat stock screener, lets check the stats and against 2 competitors from Morningstar and Google:

PG Comparison

  1. Price to Earnings – Forward earnings are looking to be $3.85 now based on the analysts for 2015.   With the current price, this means the P/E is roughly 17.77 – under the S&P ratio and also is less than the 2 competitors listed above.  Not too shabby, appears slightly, slightly undervalued (yes I said that word twice).
  2. Dividend Yield – Current yield is at 3.87%; which my portfolio overall is currently at roughly 4%.  Very close to it, which to me is a positive area, it wouldn’t have too much impact to where I currently stand.  Also, it is yielding much higher than the other 2 competitors, currently.  The 5 year yield comparison, which I love, shows that it is 67 basis points higher!  The others aren’t showing much of a value there.  This is good news for a potential investment into PG as it is one of the reasons why this downturn offers more yield for less of a price as I explained last week.
  3. Payout Ratio – at 68.87% from my calculation – slightly above the 60% threshold that I like.  This could have been a reason why Bert didn’t have them on his list.  I believe with the cleanup, EPS could be higher, leaving more room in the payout arena.  However – this could be one of the reasons that THIS year, there was a dismal 3% growth.
  4. Dividend Growth Rate – As well all know, the power of the growth rate is real. The 5 year average is at 7.23%, the 25 year average at 10%, but the last 4 years are at 7% or below, with this previous increase at 3%.  I don’t see it going back to the golden days of 10-13% growth, but I see it coming back beginning next year.  Not the worst DGR, CL, as a competitor, currently has more growth than PG over the last 5 years.
  5. Share Buy Back – See why this is big news for dividend investors ; but PG has actually increased shares by 5M or 0.18% (small).  However, they still had almost $5B worth of share repurchases this year.  Interesting, no real impact here.

Conclusion on PG Stock Analysis

I like Procter & Gamble or PG.  I like what they are doing with the company and how it pairs well with my recent purchase into JNJ, another aristocrat and foundation stock.  Further, I currently only receive (at this time) $13/quarter in dividend income from PG – as you have seen in my August Dividend Income post and I would actually like to almost double that investment, at least enough to pick up a whole share during the year with reinvestment.  The markets are taking a downturn consistently, and it may be time to gather the army of capital to deploy here soon.  Within the next upcoming weeks, if PG stays below the $69 mark, I just may pull the trigger and pick up 15 to 20 new shares of PG.  I’ll have to get my capital ready and I’m excited to see if I can add more of this aristocrat stock to my current portfolio, which would help push me closer to my goals.

What does everyone else think of PG right now?  Would you purchase at these levels?  Like where the market is going?  Any takers here?  Love the feedback and excited to hear back!  Thank you again for stopping by to check this out.



19 thoughts on “Procter & Gamble (PG) Stock Analysis

  1. Lanny,
    Excellent analysis. I agree with you on the growth part. I see this trend with other stocks that have an international presence. In part, I think the strong dollar is coming into play.
    For me, I’d like to own more but PG is one of my top holdings and I need to rebalance my other holdings. The price is currently very attractive. This also makes the yield attractive too.

    • Div4Son,

      Thanks for coming by. Very attractive for sure at these prices, I’m down about 10%+ since the first time I purchased them and their yield is much higher than their historical yield. Big decisions to be made, but can’t go wrong sometimes, eh?


    • Pollie,

      Thank you for coming by. I do agree – love JNJ, have a huge position in them. Think PG works with me because I don’t have that large of one – looking to bring more of them in and “take care” of that position while the price is being compressed. It’s a tough debate!


  2. Ciao Lanny,
    Looking at entering in PG for some DCA next week, needs to be a little bit cheaper and then i will buy some more. Yes it’s slowing down, yes it’s selling brands (effects will be accounted for in 2016/17 by the way), yes it’s this and that, but the reality of things is that is a very solid business where people are placing too many expectations in my opinion. I know that a 3% dividend growth is lousy, but think about it from a different angle (usually the one I take): it’s higher than inflation.

    So you get a stock that pays dividend higher than inflation, and a very low growth that it’s higher than inflation itself.
    To me this is a buy, at certain rules and values, but it’s a buy.
    If you know that PG will never skyrocket at +55% in stock value and will never sport +30%dividend growth I think that you will be happy with it (or at least I am…)

    ciao ciao


    • Stalfare,

      Thanks for coming by – I like that you’re looking forward to PG. You’re right – expectations should be contained. A dividend raise is a raise and if it pairs higher than inflation, obviously – that’s the key. I’d then like to see the yield right now a bit higher to be > my overall weighted average yield. Inching down, however, isn’t a bad idea in my mind. I don’t expect huge raises or growth – I expect around 5-8% div growth, however. Hmm… decisions.


  3. I personally wouldnt touch it with a 10 foot pole.

    Look at PG on the 1 month charts. It had been steadily rising from $60 or so back in 2010 until its peak early this year around $90. My analysis would have had me selling or shorting around $83 back in March. It has 7 months of straight red candle (almost 9 actually). Several indicators look like the downtrend will continue for several more months. Id wait it out for now as it keeps looking for a bottom.

    • Jake,

      Thanks for the input and will continue to monitor it. If I like the value, I’ll purchase it – given it has dropped – from your comment at $90 to $68, that is a $22 decline or 24% decline. Given if I buy more now and it drops even further by another 5-10%, then I’ll scoop up more; think that would be my plan. Thoughts on that Jake? Curious.


  4. I too have had my eyes and P&G, and in chorus with Investing Track I am bearish on the stock market as a whole for the medium term. However that won’t stop me from buying solid companies in the mean time. My retirement goals won’t be hampered if I buy P&G at these levels, only to watch it drop another 5-10%. It’s all about the income stream you are building and making sure to out pace inflation.

    Looking forward to hearing about your next purchase!

    • Andrew,

      I debated a lot today. Everyone is talking to me and asking “what if the market falls another 10%?”. I respond back saying – if I think there is value now and it’s discounted, I’ll buy now. If in 1 day or 10 months it drops or falls another 5-10% in stock price and if the value is there and I feel it is again – undervalued or discounted – I’ll buy more. Nothing more fun than buying more income for less! Consistency is key.


  5. Very good timing to buy this stock indeed! Future looks bright too with recent decisions and price is clearly undervalued! I always thought PG should be part of any dividend investor portfolio. Time to add it in for sure!



  6. I like PG and I own PG, but keep in mind the price is beaten down b/c of the negative earnings and revenue growth. As far as dividend stability operating cash flow and levered free cash flow are still there for the dividends, but Cash Flow growth is -3.17% over the past 5 years.

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