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:
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:
- 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).
- 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.
- 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.
- 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.
- 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.
-Lanny