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Procter & Gamble May Boost Returns to Investors

January 17, 2014 | About:

The Procter & Gamble Company (NYSE:PG) is focused on providing consumer packaged goods. The company's products are sold in more than 180 countries and territories worldwide primarily through mass merchandisers, grocery stores, membership club stores, drug stores, department stores, salons, e-commerce and high-frequency stores, and the neighborhood stores, which serve many consumers in developing markets.

Performance So Far

P&G has increased it dividend payment to reach slightly more than $0.60 per share in 2013. This puts the company's annual yield at 3%. More than 20 of P&G's brands generate $1 billion or more in revenues per year and they are extremely popular. P&G's growth prospects are interesting. There's something special about P&G. It pays a good dividend. While they don't garner the notoriety of high-flying growth stocks, they're also less likely to crash and burn. And over the long term, the compounding effect of the quarterly payouts, as well as their growth, adds up faster than most investors imagine.

In its 2012 fiscal year, the company spent $9.3 billion on marketing, including advertising on television, radio, print, digital and in-store ads. About a third of P&G's revenue comes from North America, which is the biggest market for its media spending. Procter & Gamble is currently offering investors an opportunity to buy portions of the company at $81 a share. According to the 2013 annual report, sales growth was 3% year over year. Core EPS rose 5% year over year. Additionally, P&G is investing for future growth. EPS is expected to grow over 8% this year.

Procter & Gamble boasts of a strong dividend track record — over the past six years it has more than doubled its quarterly dividend payment. Procter & Gamble has paid dividends for 122 years.

Plans Ahead

The maker of Pampers diapers and Tide detergent is considering a merger of its Western European unit with its Eastern and Central Europe business, while its Indian business will combine with the Middle East and Africa to form another group. P&G chief executive A.G. Lafley said the consumer products giant's digital spending on things like online ads and social media ranges from 25% to 35% of its marketing budget and is currently near the top of that range in the U.S., its biggest market.

The company is planning to spend more on advertising, and its growing emphasis on digital media reflects both the shift in where consumers are focused and a desire to increase the effectiveness of the money it spends. Company executives say digital media in many cases is proving to be a faster and cheaper way for P&G's brands to reach consumers, and feedback is also faster. The CEO, who previously ran the company from 2000 to 2009, said P&G will sharpen its focus on product innovations, cost cuts, and execute well with core brands and its most important markets. He said P&G also has a plan to revive its Pantene and Olay beauty brands, which have been losing share to rivals in recent years.

Procter & Gamble Co. is aiming for a sales boost of more than $150 million from advertising and promotional campaigns around the Sochi 2014 Olympics. The company is planning of activating in the markets where the Olympic Winter Games are most relevant, such as Russia, the U.S., Canada, Germany and Poland.

Changing Approach towards Emerging Markets

P&G's new approach toward emerging markets has started to pay off. Considering that global revenue only represents 40% of P&G's total revenues, a successful emerging market strategy could become a massive growth catalyst. P&G is adding premium products throughout its closet of brands.

To End

The company is investing in projects which will produce greater returns to its investors. Combined with their earnings growth and share buyback activity, P&G will provide valued returns to its shareholders. Looking ahead to the fiscal third quarter, analysts forecast 2.6% sales growth and 10.1% earnings growth. This is impressive.

P&G serves approximately 4.8 billion people around the world with its brands. The Company has one of the strongest portfolios of trusted, quality. P&G has always commanded brand loyalty among consumers. One of the most important ways they fuel investments in innovation and brand building is through cost savings and productivity improvements. It is a solid company overall with improving technicals and is one of the most respected brands globally. It may be a good bargain moving forward, and with its worldwide brand recognition and presence, it is bound to be around well into the future.

Rating: 4.6/5 (10 votes)


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