P&G Stock Analysis: Dividend Increases Since 1957

PG Stock Dividend Review – Safety, History, Growth, Valuation & More!

Let’s work through a Procter & Gamble stock dividend review.

Since Procter and Gamble’s stock is a long-time staple holding for many dividend investors.  And I too have been an investor in Procter and Gamble stock for quite a few years.

In addition, we use a number of Procter and Gamble products around our household.  So let’s get started with a few key takeaways from today’s article.

Then review P&G’s current product lines. And finally, run Procter and Gamble stock through a dividend review and stock valuation analysis.

Procter & Gamble stock dividend analysis

Disclosure: At no cost to you, I may get commissions for purchases made through links in this post.

P&G Stock Dividend Analysis: Key Takeaways

1. P&G’s business is benefiting from the company’s restructuring to focus on fewer brands. And a recent reversal of past trends where consumers strayed away from branded household products.

2. Procter and Gamble’s stock has a long and rich dividend history. The company is a Dividend King. Dividend safety is high. And dividend growth appears to be reviving after several years of low dividend increases. To boil it down, P&G is one of those good dividend-paying stocks.

3. P&G stock has appreciated significantly during the last 2-3 years. Leaving the shares looking overvalued.

4. I view P&G shares as a solid long-term hold in my dividend portfolio. However, the stock looks to be a better buy for me at or below $125 per share.

Procter & Gamble Company Background

P&G is a branded consumer goods company.

They classify their products into a number of different areas. Here are the major categories. And an example of one or two products from each.

Fabric Care

For example, Tide laundry detergent. This is one of their most well-known brands.

Home Care

Cascade for the dishwasher.  And Dawn for when you want to do the dishes by hand.

Don’t forget those Mr. Clean Magic erasures. They can come in pretty handy.

Baby Care

Pampers diapers are a popular item.

Family & Feminine Care

This includes Bounty paper towels, Charmin toilet paper, and Puffs Kleenex. To name just a few.

Personal Health Care

Vicks NyQuil and VapoRub are classic products. I remember using them as a kid.

Oral Care

Crest toothpaste and Scope mouthwash are iconic brands in the oral care category.

Grooming

Gillette razors.  Last I looked, they are pretty expensive. And a lot of cheaper competition has come into this segment in recent years.

Hair Care

Head & Shoulders and Old Spice.

Skin And Personal care

Ivory soap and Safeguard.

Source: P&G product categories and brands

That concludes a brief product review. Let’s talk next about business risks. And the company’s strategy to combat them.

Procter & Gamble Business Risks

Branded consumer products businesses have been facing major headwinds. Organic growth rates have been weak as consumers shift to lower-cost private label products.

And there is stiff competition in retail stores from local brands in foreign markets.  It takes time and money to understand the cultural preferences of local consumers.

On the other hand, the global health crisis has driven people to spend more time at home. And with that, has come an increased demand for the well-known brands that P&G supplies.

On the expense side of the ledger, commodity price inflation and transportation cost increases must be dealt with.  Finally, a stronger US dollar presents a threat because so much of P&G’s business is done in foreign currency.

Procter and Gamble (PG) dividend investing guide

Related: What I look at to pick my dividend stocks

Procter & Gamble Growth Strategy

To combat business risk, P&G has a 5 point strategy.

Focused product portfolio – With an emphasis on daily use products

Superior products – Product quality, packaging excellence, and high value

Productivity – Cost reductions and efficient cash usage delivering billions of dollars in savings to fund profits and investments

Constructive disruption – Through brand building, digitization and supply chain efficiencies

Organization – Operating through 6 industry based strategic business units

Source: P&G strategy

Procter & Gamble Stock Symbol

Finally, Procter & Gamble stock trades on the New York stock exchange. It does so using the stock symbol PG (NYSE: PG).

When you trade stocks, be sure to use the best tools. And trade for free. I use the Webull app.

For the next part of our P&G stock analysis, I want to move onto the P&G dividend review. Before investing my money, I like to know exactly how a company’s dividend works.

We shall start with the answer to an obvious question…

Does Procter & Gamble Pay Dividends?

Yes. Procter & Gamble is a stock that pays regular and recurring dividends. And, the company has done so for a very long time.

So, let’s dig into all of the facts and figures. I want to take a close look to see how the dividend is impacting our finances and passive income stream.

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Procter & Gamble Dividend Payout

Procter and Gamble’s stock pays a $3.48 per share dividend. This is the annual forward dividend payout rate.

The annual forward dividend per share is the most recent dividend paid. Multiplied by the number of times a company pays dividends each year.

Procter & Gamble Dividend Yield

The P&G stock dividend payout provides us with a 2.4% dividend yield. At the time of this update.

The dividend yield is a stock’s annual forward dividend rate. Divided by the stock price.

Finally, a stock’s dividend yield changes daily. It has an inverse relationship with a stock’s price. And we all know how quickly stock prices can change.

How Often Does Procter & Gamble Pay Dividends?

P&G dividends are paid on a regular basis. Quarterly, or in other words, 4 times per year. The first dividend payment of the year is made in February.

What Months Does P&G Pay Dividends

After the first dividend of the year, dividend payments follow in 3-month intervals. So, P&G’s dividend payments are delivered in February, May, August, and November. During these months, the dividend is paid on or around the 15th day.

This is one of several typical quarterly dividend payment patterns. And many US stocks follow the same dividend payment pattern as P&G.

When Is The P&G Ex-Dividend Date?

Are you a potential new shareholder or one looking to make an add-on buy? Then you may want to receive the next P&G dividend issuance. To do so, you must complete your investment BEFORE the ex-dividend date.

P&G’s ex-dividend date falls during the 3rd week of the month PRIOR to when its dividend is paid.

First of all, each quarterly dividend payment is subject to the approval of their board of directors. As a result, the timing of both the ex-date and the payable date changes slightly each quarter.

So, check the company’s investor relations website if the exact dates are important to you. But this discussion should give you a general feel for the timing.

On the other hand, you can be a long-term buy-and-hold dividend stock investor, like me. In that case, you will be sure to receive every dividend that Procter & Gamble pays. Then there is little need to worry about these dates.

Next up, let’s look at P&G’s dividend history. Because it is really impressive.

P&G Dividend History

First of all, Procter & Gamble stock started trading on the New York Stock Exchange (NYSE) in 1891. Furthermore, the company has paid annual dividends every year since it went public.

Finally, the P&G dividend has been increased each year starting in 1957.

Procter & Gamble Is A Dividend King

One of the attractive qualities of the Procter and Gamble stock dividend is its long history of annual increases.

P&G is a dividend king. Dividend Kings have increased their dividends for at least 50 years in a row.

I love that type of consistency as a dividend growth stock investor. But what does P&G’s recent dividend growth rate look like? Let’s check…

Procter & Gamble Dividend Growth Rate

As shown in table 1, Until more recently, P&G’s dividend growth had been pretty low.

Table 1: P&G Compound Annual Dividend Growth Rate

1 Year3 Years5 Years7 Years
7.1%5.2%4.1%4.1%

Recent P&G Dividend Increase

Fortunately, the company’s most recent dividend increase broke the trend to the upside. It checked in at 10%.

I will be watching closely for the next dividend increase announcement. However, I doubt we will see another increase in the size of the last one.

Procter & Gamble Dividend Policy

After reviewing press releases announcing their dividend increases. And shareholder meeting materials. I noted management emphasizes its long-term track record of cash returns to shareholders.

However, they stop short of declaring a specific dividend policy. This is not unusual. But I do prefer a company where future dividend payment objectives are clearly stated.

The company’s long and rich dividend history sends a clear signal about dividend policy. Let me put it in my own words…

First of all the company’s policy is to pay dividends each year.

Furthermore, increase the dividend rate per share annually.

Finally, not allow the dividend payout ratio to rise too high. Where an elevated payout ratio. Let’s say greater than 60%, could put the dividend at risk for a reduction in the future.

So, let’s dig into these business fundamentals to see if the business has been improving. And see where P&G’s dividend payout ratio stands.

As I have noted, until the last dividend increase, dividend growth had slowed. Likely a result of a rising payout ratio. This was due to declining revenues and stagnant earnings.

Related: Another stock with a long record of dividend increases

Revenue

First of all, revenue was on the decline for a number of years.  This was due to a major restructuring the company started in 2014.

At that time, the company decided to restructure by selling off more than 100 brands. They felt doing so would accelerate growth.

Chart 1: P&G 7-Year Revenue Trend

P&G stock analysis: revenue trend

Furthermore, selling off brands to grow may not make sense on the surface. However, to coin a couple of old expressions, P&G pursued “addition by subtraction”. They assumed “less is more”.

Finally, I used their shift in strategy as a case study for a business planning course I was teaching at the time. I still have the Wall Street Journal article I used in class that outlined their big strategic announcement.

They didn’t identify any of their brands to be sold at the time.  However, they said those brands represented about $8 billion per year in revenue.  And that is roughly the revenue drop the company experienced starting in 2015.

More than 40 beauty brands were sold to Coty.  And the Duracell battery brand was sold to Berkshire Hathaway. These were just a couple of the divestitures.

With their strategic repositioning completed, it appears revenues bottomed out at $65 billion. And, has grown slowly, but consistently starting in 2017.

P&G Dividend Payout Ratio Based on Earnings

As shown in the chart below, accounting earnings are very choppy. And, hard to understand, in my opinion.

Chart 2: P&G Earnings and Dividends Per Share

Procter and Gamble earnings and dividends

Why are earnings so erratic? Because of gains and losses reported on the sales of their brands. In addition to the one-time impact from the 2017 tax reform act.

In fact, the spike in earnings in 2017 was from the gain on the sale of the beauty brands to Coty. And the earnings drop in 2019 was due to the one-time write-off of goodwill and intangible assets from the Gillette shave care business. Guys are shaving less and low-price competition has increased in this area.

Nevertheless, there are 2 things that I can take away from the chart. By taking a long-term perspective.

First of all, the company’s dividends per share have grown steadily.  Furthermore, earnings per share usually cover those dividends by a good margin. For example, during 2021, the P&G stock dividend payout ratio came in at 57%.

It should be noted too, that P&G has taken on aggressive cost reduction programs. These efforts have provided solid support for earnings growth and cash flow.

So, let’s look at P&G dividends versus cash flow next…

Procter & Gamble Free Cash Flow

What does the chart below show? It tells us that P&G has been using less than 60% of its free cash flow over the past three years to pay dividends.

For such a stable company, selling consumer staple products that have consistent demand, this is a very comfortable dividend payout level to me.

Chart 3: P&G Dividends and Cash Flow

PG dividends vs cash flows

A few thoughts on cash flow…

First of all, in contrast to accounting-based earnings, cash is cash. A company cannot manipulate its cash flows.  And cash is not impacted by accounting rules.

Furthermore, if I could only have one financial statement from a company, I would choose its statement of cash flows.  From my perspective, it tells me the most about a company’s recent performance.

Finally, the rest of P&G’s free cash flow is allocated to retiring its shares in the stock market. And, to a much lesser extent, reducing debt.

Speaking of debt, let’s look at P&G’s financial position. First, credit ratings. Then, capital structure, using debt to equity.

Procter & Gamble Credit Rating

It’s a good idea to check in on a company’s credit rating. Similar to how your own credit score works, the rating provides an indication of how safe it is to lend the company money.

You can check your own credit score for free using Credit Karma. I will check P&G’s for you…

Moody’s and S&P rate P&G as “investment grade – very low credit risk”.  They provide Aa3 and AA- ratings, respectively.

This is a very strong credit rating. It ranks quite high in the credit evaluation chart shown below.

Furthermore, do you like the idea of investing in companies with high credit ratings? Then P&G makes the grade.

You could also add a stock like Microsoft (MSFT) to your dividend investment portfolio.

Table 2: Credit Rating Evaluation Grid

Credit rating evaluation grid

Or, the giant diversified health care company, Johnson & Johnson (JNJ).

Because MSFT and JNJ are the only 2 US-based companies with the highest (AAA) credit ratings!

Procter & Gamble Debt To Equity

The credit ratings give me an indication that the company has a very strong balance sheet. And, P&G does, in my opinion. Let’s take a closer look…

Because I do not like my dividend stocks loaded up with an unsustainable amount of debt. So, I also judge a company’s financial position based on its debt to equity ratio.

P&G has a low debt to equity ratio checking in at just .7 times. Combine this with the fact that the company has billions of dollars of cash on its balance sheet, and rock-solid credit ratings.

To sum up, this company has a very secure financial position. This leads me to an easy conclusion on dividend safety…

Procter & Gamble Dividend Safety

I make a judgment regarding dividend safety for every dividend stock I own. It helps me to avoid dividend reductions from stocks in my dividend growth stock investment portfolio.

This P&G stock review tells me that Procter & Gamble’s stock dividend is very safe from a reduction in the foreseeable future.

I base this conclusion on many of the areas we have reviewed thus far. Specifically:

  • Business fundamentals
  • Dividend yield
  • Dividend payout ratios
  • Historical dividend track record
  • Credit ratings
  • Financial position

So, P&G’s dividend is safe. But will it grow? Let’s see…

Procter & Gamble Dividend Growth Projection

In order to plan for making dividend income, I also forecast annual dividend growth. It’s much easier when a company clearly communicates a stated dividend policy.

Unfortunately, this is not the case for P&G. But, I still do my best to make a forecast based on:

  • Historical dividend growth
  • Dividend payout ratios
  • Business fundamentals
  • Company growth strategy

Given these elements, this is what I’m thinking over the long term…

P&G will be able to grow sales by 2-4% annually. And increase earnings by 5-7% each year. While maintaining its dividend payout ratio at current levels. Therefore dividend growth will match earnings growth.

Based on these assumptions, I am forecasting 5-7% annual P&G dividend growth over the long term.

This company’s projected dividend growth rate is higher than in the last several years. But not as fast as when P&G was a smaller rapidly-growing company.

Next, let’s move onto stock valuation. Before we wrap up…

Procter & Gamble Stock Valuation

Procter & Gamble stock looks overvalued to me. The stock was much cheaper in 2018.  And has nearly doubled off the lows of that year.

To draw this conclusion, I reviewed the P&G stock valuation in several ways. Different valuation methods have pros and cons. By looking at several, I can draw my own conclusions.

For P&G stock, each valuation method indicates a more reasonable buy target at lower prices. Specifically, a buy target at or below $125 per share looks pretty good to me. For my investment decision-making purposes.

Now for the valuation tools and measures that support this conclusion.

P&G Dividend Discount Model Valuation

The single-stage dividend discount model uses several factors we have discussed thus far.

  • The current annual dividend payment
  • Projected annual dividend growth

And one item we have not yet discussed. My desired annual return on investment of 9%.

Using these variables the dividend discount model calculates the fair value of Procter and Gamble stock to be $123 per share.

Morningstar Fair Value Estimate

The investment analysis firm Morningstar estimates the fair value of P&G stock to be $118 per share.

I have used Morningstar for stock research for more than 15 years. They offer great analysis and objective opinions about a company’s prospects.

Source: Morningstar

Procter And Gamble Stock Price To Earnings Ratio

Procter and Gamble’s stock trades at 25 times trailing earnings.  In isolation, this is a pretty expensive valuation for a mature, slow-growth company.

On the other hand, a price-to-earnings ratio in the mid-to-high 20s is not unusual for a stable, high-quality stock such as P&G.

Simply Investing Report

The Simply Investing Report is full of dividend stock analysis and recommendations. And it has a pretty stringent method of determining a stock’s valuation.

Currently, the Simply Investing Report has an “overvalued” call on P&G stock.

Source: Simply Investing Report

Okay. That concludes our review of P&G’s stock valuation. As I said, the shares look to be a better value at or below $125 per share.

Now it’s time to wrap up. With a few thoughts on how I view P&G within my own portfolio…

Procter & Gamble Stock Dividend Analysis – Wrap Up

I have owned P&G stock for many years. And, it has grown into one of the top 10 largest positions in my dividend stock portfolio.

It’s nice to be rewarded over the past couple of years with substantial increases in P&G’s stock price. Patience was certainly required as the company restructured its brand portfolio. And, dividend growth slowed.

Is P&G A Good Stock To Buy, Sell, Or Hold?

For now, I plan to hold my P&G stock.

The relatively low dividend yield and low dividend growth are not very appealing. At least not for making new investments in additional shares.

Coupled with a high stock valuation. I think there are better dividend stocks for making money with dividends right now.

Moving forward, I will be looking for indications of faster dividend growth. And, better buying opportunities at lower prices for Procter and Gamble stock.

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Disclosure & Disclaimer: I am not a licensed investment adviser, financial adviser, or tax professional. And I am not providing you with individual investment advice, financial guidance, or tax counsel. Furthermore, this website’s only purpose is information & entertainment. And we are not liable for any losses suffered by any party because of information published on this blog.

I currently own Procter and Gamble stock. And, collect the P&G dividend.