Dividend Farming Scorecard: Proctor & Gamble (PG)

Growing dividends for 62 years.

I’ve been farming dividends for several years.  One of my dividend producers is Proctor & Gamble (PG).  I’ve held it for a while and know it’s time to review it to determine whether or not to continue farming it or replace it with a different cash crop.

The following table provides a snapshot of factors I’m scoring for PG as of April 17, 2019.  Laying out my analysis helps me benchmark a holding or opportunity against target metrics.  It also allows me to compare this firm to alternatives as part of my review process.  As a general rule, I pull the bulk of my financial data from Yahoo Finance.

FACTOR	METRICS	PROCTOR & GAMBLE
CCC List	Champion	Champion
Current Yield	4.0%	2.76%
Company Profile	Red Flags?	Treasury stock?
Industry Leadership	Top 10	#2
Market Cap	$10 B+	$264.8 B
P/E	< 20	25.7
P/B	< 2	4.99
Debt / Equity	< 1	1.3
Dividend History (Years)	25	62
12 Month Price Range	Lower Half	Near Top
Dividend Payout Ratio	< 75%	69.1%
Portfolio Weight	Slightly Over	Slightly Over

CCC List: The DRIPinvesting.org web site provides the list of Champions, Contenders, and Challengers where I normally start.   (PG) is a Dividend Champion with 62 straight years of dividend growth!  How do you top that?  It’s likely there are fewer than a dozen firms with a track record of equal or greater length.

Current Yield:  Proctor’s yield is 2.76% which is less than 75% of my target yield.  If I were considering PG as a purchase, I’d look closely at the strength of other metrics before making a buy decision.

Company Profile:  PG is well-regarded and widely known for providing name-brand goods in beauty, grooming, health, household products, and various family consumables segments.  PG brands include but are not limited to Gillette, Crest, Cascade, Swiffer, Pampers, Charmin, and a host of others.

Industry Leadership:  Consultancy UK lists PG as the #2 consumer goods company in the world and #1 in the US by revenue.  PG trails only Nestle (world) and is ahead of Pepsico (US) as of September 2018.

Market Capitalization:  At $264.8, PG’s market cap coupled with its diverse brand line-up offers tremendous stability.

Price to Earnings:  The trailing P/E of 25.7 is above my range indicating investors may be reaching a bit.

Price to Book:  The P/B is nearly 2.5x my target.  The good will, blue sky, or whatever you might call it is far and away the largest asset on the balance sheet by nearly 2:1.

Debt to Equity:  Debt to equity isn’t as bad as I feared, but at 1.3 is still above my target.

Dividend History:  Growing dividends for 62 years is remarkable.  This is an important factor for Dividend Farmers.  However, I’m not sure that span would recommend a buy decision given other data points.

Price Range:  The price is within less than $1 of its trailing 12-month (TTM) or 52-week high with a $36 dollar span – not a bargain.  However, that does explain to a degree the P/E and P/B metrics which aren’t favorable on their own.

Payout Ratio:  At 69.1% the payout ratio is in-range.  Given the 62-year string of consecutive increases, there’s no reason to think it won’t make it to 63 or more, which is good.

Portfolio Distribution:  PG is a strong, but not overweight holding in my basket.  Coupled with other consumer goods firms in the fold, however, PG would tilt the whole thing too far in the consumables direction if I add more now.

Analysis  

Of the companies reviewed the past several months (PG) didn’t score as well as I expected.  I believe the price may be rich due in part to the number of institutional investors required to have it in their portfolios e.g., index funds, ETFs, etc., all of which can drive excess demand producing an overbought issue. 

The price may not fall far enough to make it a buy at this time, but I already have it in my portfolio so purchasing isn’t a consideration.  There are some blemishes but no heart-stopping red flags.  The inherent stability of the offering means there’s little potential for a fire sale in the foreseeable future.  PG went ex-dividend yesterday with a May 15 payout date so I may as well hold it and enjoy another distribution and reinvestment continuing the compound growth vital to Dividend Farmers.    

The thoughts expressed here are those of the author, who is not a financial professional.  Opinions should not be considered investment advice.  They are presented for discussion and entertainment purposes only.  For specific investment advice or assistance, please contact a registered investment advisor, licensed broker, or other financial professional.