Procter & Gamble Offers Six Decades of Annual Dividend Hikes, 3.5% Dividend Yield (PG)
By: Ned Piplovic,
Only S&P 500 companies that have boosted their annual dividend for at least 25 consecutive years and have market capitalizations in excess of $3 billion earn the Dividend Aristocrat designation. Additionally, P&G is also a member of an even more exclusive group of only 16 Dividend Kings, which have more than 50 consecutive annual dividend hikes.
In addition to the decades-long record of annual dividend hikes, the company also offers its shareholders a 3.5% dividend yield, which is higher than the company’s own five-year average. Furthermore, P&G’s current yield outperformed the average yields of the company’s peers in the Consumer Goods sector and the Personal Products industry subsegment.
While the company’s rising dividend income distributions have remained steadfast, the share price stumbled and dropped almost 24% in the first half of 2018. However, this price drop was only temporary as the share price has already recovered more than half of these losses since bottoming out at the beginning of May 2018. Additionally, the price drop in early 2018 has been just a blip in the share price’s long-term trend. The share price has more than doubled over the past decade and has increased more than 15-fold over the past two decades.
Investors interested in taking advantage of the current price dip, should confirm risk exposure and compatibility with their own portfolio strategy before taking a position in the P&G stock. All investors that act before the October 18, 2018, ex-dividend date will ensure eligibility for the next round of dividend distributions on the November 15, 2018, pay date.
The Procter & Gamble Company (NYSE:PG)
Headquartered in Cincinnati, Ohio and founded in 1837, The Procter & Gamble Company provides branded consumer packaged goods globally through five business segments. With a 32% share of revenues, Fabric & Home Care is the largest business segment. This segment provides fabric and laundry care, air care and dish care products, as well as professional and surface care products under the Ariel, Downy, Gain, Tide, Cascade, Dawn, Febreze, Mr. Clean and Swiffer brands. The second largest business segment – Baby, Feminine & Family Care with 27% share – offers baby wipes and diapers, adult incontinence and feminine care products, paper towels, tissues and toilet paper under multiple brands, including Luvs, Pampers, Always, Bounty and Charmin.
The Beauty segment offers conditioners, shampoos, styling aids, skin and personal care products under several global brands, including Head & Shoulders, Pantene, Olay and Old Spice. Next, the Grooming segment provides blades, razors and hair removal appliances, as well as other shave care products under the Braun, Fusion, Gillette, Mach3, Prestobarba and Venus brands. Lastly, the Health Care segment offers Crest, Oral-B, Metamucil, Prilosec and Vicks branded oral care, gastrointestinal, respiratory and other personal health care products.
As indicated, the company’s share price declined nearly 24% from its 52-week high of $93.14 on January 6, 2018 before bottoming out at its 52-week low of $70.94 on May 2, 2018. After reversing direction and gaining more than half of its losses, the share price closed on October 9, 2018, at $82.20. While this closing price was 11.7% short of the 52-week high from one year earlier, it was almost 16% ahead of the May bottom.
The current $0.7172 quarterly dividend is nearly 4% higher than the $0.69 payout from the same period last year. This new quarterly amount is equivalent to an annualized dividend payout of $2.87, which corresponds to a 3.5% forward yield. The current 3.5% yield tracks 9.1% ahead of Procter & Gamble’s own five-year average of 3.2%. In addition to outperforming its own five-year average, P&G’s current 3.5% yield is also nearly 70% above the 2.07% average yield of the entire Consumer Goods sector and 46% higher than the 2.39% simple average yield of all the companies in the Personal Products industry segment.
After decades of consecutive annual dividend hikes, P&G has advanced substantially its total annual dividend payout amount. Just over the past 20 years of consecutive dividend hikes, the company maintained an average dividend growth rate of 8.4% per year, which enhanced the total annual dividend amount five-fold.
Despite the recovery in the second half of 2018, the share price drop erased all benefits of dividend distributions and delivered a 7.7% total loss for the trailing 12 months. However, if the share price uptrend continues, the total returns could come back very soon toward recent levels of 22% over the past three years and 25% over the past five years.
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Ned Piplovic is the assistant editor of website content at Eagle Financial Publications. He graduated from Columbia University with a Bachelor’s degree in Economics and Philosophy. Prior to joining Eagle, Ned spent 15 years in corporate operations and financial management. Ned writes for www.DividendInvestor.com and www.StockInvestor.com.