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- Ol' Reliable Is Getting Cheap...
Ol' Reliable Is Getting Cheap...
New Lows For This Consumer Staple Stalwart
With markets hitting all-time highs and starting dividend yields sinking to new lows, I was getting desperate…
Excluding utility stocks and some food producers, there isn’t a lot of obvious value right now — until my phone buzzed with a limit order notification. It turns out that one blue chip mega cap consumer staple stock is getting cheap.
The Procter & Gamble Company $PG ( ▲ 0.11% ) is scraping its 52-week low.
And thanks to decades of steady dividend growth, this firm is now offering a 2.75% starting yield. That’s about twice the initial yield that Vanguard’s S&P 500 ETF $VOO ( ▲ 0.51% ) currently offers.
On top of this, Procter & Gamble has strong fundamentals, a robust portfolio of essential products, and a long-term dividend growth rate that outpaces inflation.
This isn’t a super obscure stock or a “hidden gem investment.” But I want to demonstrate why The Procter & Gamble Company could be a terrific buy-and-hold investment, especially at its current price.
The Procter & Gamble Company ($PG)
Reviewing huge, blue chip stocks that everyone knows often feels like a waste of time.
There’s nothing I can uncover about Chevron or McDonald's that’s new or unique. However, there are a few interesting facts about Procter & Gamble that are worth putting into perspective.
For instance, the company has consistently raised its dividend every year for the past 68 years.
The Procter & Gamble Company’s dividend growth streak started before my parents were born. Additionally, Procter & Gamble has paid dividends for 135 consecutive years.
Some of Procter & Gamble’s dividend payments actually predate the sport of basketball, which James Naismith invented 134 years ago.
Even today, The Procter & Gamble Company still maintains a fairly low payout ratio of 59.64%, meaning there’s plenty of room for future dividend growth. And, the current starting yield of 2.75% is actually higher than the starting yield of Vanguard’s Vanguard High Dividend Yield Index Fund ETF $VYM ( ▼ 0.32% ).
Lastly, and this is what everyone always says about the company, Procter & Gamble owns a portfolio of over 22 different brands that each generate at least $1 billion per year.
Crest toothpaste, Gillette razors, Pantene shampoo, and Pampers diapers...
These are just a few of Procter & Gamble’s billion-dollar brands. It’s a diversified business that operates almost like its own mini-ETF of consumer staple goods.
In terms of valuation, Procter & Gamble is cheap compared to what it was trading for last year. A price to earnings ratio of 22.69 isn’t super inexpensive, but this is a dependable blue chip conglomerate with 68 years of consistent dividend growth.
Forward PE ratio of 22.69
2.75% starting dividend yield
5-year dividend CAGR of 6.12%
Payout ratio of 59.64%
10-year stock performance 9.39%
This isn’t a crazy cheap investment idea. And it isn’t a fast-growth, asset-light business. But, The Procter & Gamble Company offers stable dividend growth that’s backed by a portfolio of recognizable and essential brands.
Would I buy The Procter & Gamble Company at its current price?
Yes. I actually bought shares via limit-order the other day. This is a dependable income investment with a starting yield that’s now higher than some “high-yield” ETFs. And, Procter & Gamble has consistently delivered inflation-beating dividend growth.
Maybe not a super sexy business or one that’s particularly exciting.
But, The Procter & Gamble Company has consistently paid a dividend every year since 1890. And, the company has grown its dividend for the past 68 years. With a reasonable payout ratio and portfolio of timeless products like soap and toothpaste, Procter & Gamble should continue its dividend growth streak for decades to come.
Disclaimer: This article is for entertainment purposes only. It is not financial advice, always do your own research.