Procter & Gamble Co (NYSE:PG) has been a safe haven for dividend investors during the recent market turmoil. PG stock is up about 4.3% since the start of the year, compared to a fall of about two percent for the S&P 500 index.
P&G is a massive multinational consumer goods company with a deep portfolio of some of the most recognized brands in the world. If you believe in buying a quality business that will be able to withstand tough times, then Procter & Gamble stock may be worth a closer look.
P&G Is a Great Business
P&G’s portfolio consists of some of the best-known brands in the world. Every time I brush my teeth with “Crest” toothpaste, wash my clothes with “Tide” laundry detergent, shave with my “Gillette” razor, or use my “Swiffer” to sweep the floors, I’m reminded that I’m using a P&G product.
Strong brands build allegiances with consumers, and this is what will keep customers purchasing the company’s products. On top of that, Procter & Gamble can raise prices a little bit each year and keep the free cash flowing, keep rewarding investors.
Since 1890, P&G has paid out dividends and it has raised them every year for the past 59 years. That puts the company among the “dividend aristocrats,” which are the companies that have paid out dividends to shareholders for at least 25 straight years. Even in times of economic glut, shareholders will receive an increase in their dividend paychecks.
P&G stock’s dividend yield is currently 3.3% and the company is also planning to repurchase about $8.0–$9.0 billion worth of shares in 2016, which should provide support for P&G stock’s price. (Source: “P&G Delivers +2% Organic Sales, +9%Core Earnings Per Share in Second Quarter Fiscal 2016,” Proctor & Gamble Co, January 26, 2016.)
Cutting the Fat
Last year, P&G announced that is was planning to divest or discontinue up to 100 of its smaller, slower-growing brands to focus on the 70–80 that account for more than 95% of its profit. (Source: “Five reasons to buy and hold this powerful U.S. dividend stock,” The Globe and Mail, March 3, 2016.) P&G’s goal here is to direct marketing, advertising, and research dollars on brands that provide the greatest return.
The company also announced that it is undergoing a $10.0-billion cost-cutting program. These initiatives should help the company’s bottom line in the years to come and help to fuel those dividends.
The Bottom Line on P&G Stock
PG stock is a solid pick for any income investor looking to add to their portfolio to consider. Given the company’s track record, you might want to take a closer look at Procter & Gamble stock.