Procter & Gamble Rewards Shareholders With 4% Dividend Hike


Date: 16.03.2019


The Procter & Gamble Company (PG - Free Report) or P&G’s board of directors declared a 4% hike in its quarterly cash dividend to 71.72 cents per share, in a bid to impress investors. The dividend will be paid on or after May 15, 2018 to shareholders of record as of Apr 20, 2018. The new figure will add up to an annual dividend of $2.8688 per share.

This consumer goods giant has consistently increased its dividend and has been paying dividends for 128 years, ever since its incorporation in 1890. In fact, the latest increase marks P&G’s 62nd consecutive year of dividend hike that reflects the company’s commitment to add value to shareholders, reflecting its confidence in business growth.

P&G is considered to be one of the dividend aristocrats in the S&P 500 Index, given its consistent increase in dividends each year in its span of operations of more than 100 years in business. This, along with a dividend yield of more than 3% (3.53% as of Apr 10, 2018) helped P&G to attain the position.

P&G generates strong cash flow annually. The company generated operating cash flow of $7.3 billion in the first six months of fiscal 2018, compared with $6 billion a year ago. The company spent $1.9 billion as capital spending in fiscal 2018 so far. Thus, the company was left with a significant free cash flow of $5.4 billion versus $4.7 billion in the year-ago period. This allows management the opportunity to invest in product innovations, acquisitions and brand development, in addition to regularly paying dividends and repurchasing shares. In the first six months of fiscal 2018, the company returned $7.9 billion of cash to shareholders via $3.6 billion of dividend payments and $4.3 billion of common stock repurchase.

P&G is known for strong brand recognition, diversified portfolio, impressive product development capabilities and marketing prowess, as well as strong cash flow productivity. The company remains focused on balanced growth through improved product, packaging and marketing initiatives, and productivity cost-savings plan.

Additionally, growth from emerging markets like China and India is expected to make 2018 another strong year for P&G. For fiscal 2018, P&G expects earnings per share growth of 5-8%, a modest improvement from the prior expectation of 5-7% growth.

Investors should keep in mind that P&G's shares have lost around 13.2% in the past year, comparing unfavorably with 3.5% decline of its industry. The 13.2% decline also compares unfavorably with the broader Consumer Staples sector’s decrease of 1.9%. Earnings estimates have remained stable for fiscal 2018 over the last 30 days.

The recent dividend hike is expected to bolster investors’ confidence in the company’s financials, improve its market position against competitors and lend upside to the stock. 

Zacks Rank and Key Picks

P&G carries a Zacks Rank #4 (Sell).

Some better-ranked stocks from the Zacks Consumer Staples sector are Tyson Foods, Inc. (TSN - Free Report) , Church & Dwight Company, Inc. (CHD - Free Report) and Hormel Foods Corporation (HRL - Free Report) .

Tyson Foods, a Zacks Rank #1 (Strong Buy) stock, has an expected EPS growth rate of 25.2% for this fiscal. 

Church & Dwight, a Zacks Rank #2 (Buy) company, is expected to register 16.5% EPS growth in 2018.

Hormel Foods, also a Zacks Rank #2 stock, is expected to witness earnings growth of 9.6% for the current year.

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