Procter & Gamble Company, based in Cincinnati, Ohio, has been making high-quality consumer goods for almost 175 years. There’s an excellent chance that you are a longtime user of one if its many products. With familiar brands like Pampers, Tide, Crest, NyQuil, Max Factor, Swiffer, and Duracell, hundreds of millions of people around the globe are affected by the products made by P&G – and the company is still poised to grow in the future.
So the question is: Will Procter & Gamble follow its past practices of raising its dividend?
Experienced market watchers and investors know that there is no such thing as an absolute sure thing. That said, an expected bump in P&G’s dividend is the closest you can get to certainty in the modern market.
One need only look at P&G’s history to see why. The conglomerate has increased its dividend in each of the past 57 years. In addition, P&G has paid out an annual dividend to its shareholders in every year since 1890. And the company has not cut its dividend since…well, since never. That’s why Procter & Gamble has garnered the reputation of being a surefire “dividend king” among investors.
Currently, the company’s dividend sits at 60.15 cents per share, which is a 7% increase over its previous mark in April. This came on the heels of an identical 7% bump announced in April of 2012. In case you’re scoring at home, since 1970, Procter & Gamble’s dividend has risen over 5800%!
Procter & Gamble’s earnings statements have also put some smiles on shareholders’ faces. During the company’s fiscal third quarter (which corresponds to the calendar first quarter), P&G posted a 3% jump in organic sales and is predicting a similar increase for Q4. In addition, the conglomerate announced a 5% rise in core net earnings per share to 99 cents. Also, P&G’s core operating profit margin and gross margin improved 10 and 20 basis points, respectively. Finally, P&G noted that in businesses representing over half of the sales in Q3, the company maintained or grew market share.
But will Procter & Gamble’s future be as rosy as its past?
Experts believe that P&G stock will continue to shine brightly for three reasons. First, the conglomerate has such a diverse product line that any weakness in one division is likely to be offset by growth in another. This diversity is evident in P&G’s six business segments: Fabric Care and Home Care, Baby Care and Family Care, Health Care, Pet Care, Grooming, and Beauty. With its huge assortment of offerings, people across the globe are likely already using one or more of P&G’s products – which helps ensure a consistent revenue stream for the company.
Secondly, P&G has a long and storied history of pioneering new products and business practices, which has been one of the biggest reasons for its long-term success. For instance, P&G offered a revolutionary profit-sharing program for its workers in an effort to stave off labor unrest…way back in 1887. About three decades later, P&G “eliminated the middlemen” by bypassing wholesalers and selling its products directly to retailers, which changed the grocery industry forever. P&G also pioneered market research, brand-specific marketing strategies and product supply chains in addition to groundbreaking new products like Crisco, Tide, and Downy. And before globalization became the industry buzzword of modern times, P&G had already embraced the concept. The company operated facilities in over a dozen countries by 1994, and it started expanding internationally with the opening of its Canada plant…in 1915!
Thirdly, Procter & Gamble has made some recent business decisions that have cemented its position in the consumer goods industry for the 21st century. Perhaps most notably, P&G divested itself completely from the food business this year with its sale of Pringles to Kellogg. In 2005, the company merged with Gillette, putting popular brands Oral-B, Braun, and Duracell under the P&G umbrella in addition to those made by the shaving giant.
And finally, Procter & Gamble is making positive strides in areas not directly related to its product brands. In February 2012, Procter & Gamble unveiled a massive cost savings plan that aims to slice $10 million from the corporate ledger. One year later, the firm unveiled a strategic partnership with Verix Business Intelligence, which specializes in pre-packaged analytical applications and intelligent business alerts – tools which should help P&G further maximize its business efficiency. Finally, P&G garnered praise from the eco-friendly crowd earlier this year when it announced that it achieved “zero manufacturing waste” at 45 facilities around the world.
Even though experts are bullish on an eventual P&G dividend increase, they differ on when it will take place. Because the most recent dividend bump was announced in April, there’s a strong possibility that the conglomerate may not raise it again for the remainder of the calendar year. But given its consecutive streak of dividend increases, only a pessimist would predict a static dividend as of the end of 2014.
Though its U.S. sales are expected to remain relatively flat, Procter & Gamble is poised to experience revenue growth in foreign markets such as Brazil, China, Russia, and India, where middle-class economies are starting to flourish. That growth, coupled with continued product innovation and possible strategic acquisitions, is practically guaranteed to keep Procter & Gamble at the top of the market – which means that stockholders are very likely to see a dividend boost in the not-too-distant future.
Chris Martin can give you some helpful suggestions to get your enterprise up and running. He has written about topics ranging from investing to consumer and business finance to entrepreneurism to how to liquidate office furniture.