Is Procter and Gamble a good dividend stock?

Home > Analysis > Is Procter and Gamble a good dividend stock?

Procter and Gamble (PG) is quite literally a household name. Their brands fill our cupboards, whether for use with our laundry, household cleaning, or personal health and grooming.

The business was founded in 1837, so it has had plenty of time to establish itself as a leader in fast-moving consumer goods or FMCGs as they are known.

Procter and Gamble’s market cap is $353 million and it has annual sales of $80 billion.

But does any of that make it a good dividend stock?

Some dividend stats

Procter and Gamble’s dividend yield is currently +2.49%. That’s based on a share price of $148. Its five-year dividend growth rate is just under +32.00%.

That’s impressive, but not market beating in the context of the S&P 100 index.

An aristocrat

What does stand out, however, is Procter and Gamble’s 67-year history of raising its dividend.

A track record that puts the stock into a very select group known as the Dividend Aristocrats.

Procter and Gamble has a dividend payout ratio of 57.8% which means that P&G pays out well over half of its net income, to shareholders.

It has a dividend cover ratio of 1.6 times, this ratio tells us that P&G can afford its generous dividend policy.

How high will P&G go?

Looking at Procter and Gamble in comparison to other S&P 100 stocks we find that it sits 45th in the list, in terms of dividend yield.

And 58th, if we rank these stocks by their 5-year dividend growth record.

However, the firm sits 22nd when we look at dividend payout ratios among the 100 largest US stocks.

All of this suggests that Procter and Gamble has a progressive, but relatively conservative dividend policy, and one that it can afford to maintain.

And that’s important because when you are investing for income, rather than growth, you want continuity, not fireworks.

Is Procter & Gamble undervalued?

Of course, even income investors can’t ignore share price performance completely.

Not least because a flagging share price and a high dividend yield are often warning signs about a company’s prospects.

In the short term, Procter and Gamble’s stock price has not performed that well, rising by just +1.18% over the last 52 weeks, for example.

However, if we look back over the long term we find the stock price is up by more than +93.0% over the last decade, and by +193.0% over the last 20 years.

Is PG a good dividend stock?

Procter and Gamble has grown earnings by almost +40% in the last five years, putting it 63rd in our list of S&P 100 stocks.

That’s impressive when you consider that it operates in, what are effectively commoditised markets, albeit with branded products, under intense competition with its rivals.

And let’s not forget that this earnings growth has been achieved in a period that included COVID-19, lockdowns, the return of inflation, and the cost of living crisis that it precipitated.

Proctor and Gamble won’t set the world on fire but that’s a good thing because it’s not a growth stock. Moreover, it’s an oil tanker, not a speed boat.

It shouldn’t be your only dividend play but it’s certainly one worth earnest consideration.

Scroll to Top