Procter & Gamble a Good Pick for Dividend Stocks

P&G currently sports a dividend with a yield of approximately 3.31%

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Summary

· PG currently sports a dividend with a yield of approximately 3.31%.

· This may be reason enough for some income investors to own the stock right now.

· Opportunity for dividend growth investors with a long-term outlook.

History

The Procter & Gamble Company (PG, Financial) is a consumer goods provider. The company sells its products in more than 180 countries, and sells various items including beauty and grooming products and home-good products. Currently, the company has two main segments: Global Business Units and Beauty and Grooming and Household Care.

Inside ownership

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List of former directors in management

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Description

The company has increased its dividend for 59 consecutive years. The cash dividend paid was $2.68 for 2015, which yields approximately 3% and is quite a satisfactory result for some investors who want to invest in the stock.

As the company increased its dividend for 59 consecutive years, this spots good news for those investors who have already invested in the stock.

Outlook

Procter & Gamble was not able to deliver the better financials for the year 2015 with an annual sale of $76.3 billion, a decrease of 5.0% as compared to the same period a year ago. Considering the impact of foreign exchange that impacts all companies, P&G has performed well. If we look at the company’s quarterly result of 2016, it showed that the company is performing well in all its segments, especially Fabric Care & Home Care, Baby, Feminine and Family Care. It does not seem that the bad news went away from the market soon, and the investors who are more concerned about their capital preservation than appreciation found this stock worthwhile to invest in, since the business is involved in several steadily-growing highly diversified businesses.

Opportunity growth in dividend

The consumer goods sector is yielding an average 2.45% dividend, while P&G delivered the dividend of 3.31%. Investors who are looking at long term growth opportunity may find P&G to be a very lucrative option.

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Considering the below chart of P&G's dividend declaration, there is very little risk of a dividend cut, as P&G has increased the divided every year from the last 59 years since 1957. However, this year the dividend increase rate was less, but considering the fact that P&G has sold off its many brands, they have excessive cash for the future that may be used to increase the dividend.

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The dividend increased by about 6% each year for the last five years, and I believe it will grow easily in the future; however, this year's increase of 1% is not good. Currently, P&G's sustainable payout ratio is 74.2%, which seems quite good since around 60% seems good for investors who want capital appreciation. If the company's guidance comes to fruition, these additional cash flows should be distributed to shareholders in the form of increased dividend or share buybacks. A dividend increase would be my preference. Further, the company needs more cash to spare for accretive investments when opportunity arises.

Return on equity

A company's return on equity is quite possibly the most important factor to consider when starting a position in a stock. Return on equity relates to the profitability of a company. Companies with high return on equity ratios have plenty of cash to pay dividends, finance growth and put some away for a rainy day. P&G's ratio is outstanding at 20.28% as of Dec. 15. Normally an ROE of 15% or higher is sufficient, but 20.28% under present market conditions is extremely good.

P&G trades at a discount to the market

P&G's forward P/E ratio of 19.61 is substantially lower than that of its peers or the industry. This further solidifies the stock's safe haven status. While the markets took a significant beating on Wednesday, P&G's stock held up quite well at basically flat for the month.

P&G's dividend payout may be is reason enough alone to own the stock. This dividend yield is on par with its competitors at 2.45%, the payout ratio is quite high having space for rough time, EPS growth has been consistent, and the company's ROE is outstanding. On top of all this, the company is highly profitable. Dividend growth investors should definitely consider adding P&G to their portfolios at this level. If you have a long-term time horizon this may just be the ideal time to start a position.. Take your time and be patience building a full position in the stock.

Disclosure

I don't have any investment in the aforementioned stock, nor do I get paid from the aforementioned stock company to write, and I have no plans to invest in the stock for the next 72 hours.

The above details are taken from the company filings 10K graphs and dividend payout ratio information have been taken from dividend and dividend-news.com and valuation metrics are taken from GuruFocus.com

Inside ownership is taken from GuruFocus.com.

List of members of management is taken from company filling 10K.