Procter & Gamble Co: Will PG Stock Increase Its Dividend?
PG Stock Dividend Forecast
For income investors, few things are better than a steadily increasing stream of dividends. And Procter & Gamble Co (NYSE:PG) has been providing exactly that.
Headquartered in Cincinnati, Ohio, Procter & Gamble Co is a consumer staples company. Its history can be traced all the way back to 1837, and many of its brands, such as “Bounty,” “Crest,” “Gillette,” and “Tide,” have gone on to become household names.
Today, the No. 1 reason to consider PG stock is to collect its growing dividends. Procter & Gamble has been paying uninterrupted dividends for 127 years and has raised its payout in each of the last 61 years. That makes PG stock a “dividend king,” a title reserved for companies with at least 50 consecutive years of annual dividend increases. (Source: “Splits & Dividend History,” Procter & Gamble Co, last accessed March 16, 2018.)
Trading at $79.00 apiece, Procter & Gamble offers an annual dividend yield of 3.5%. While you can find plenty of stocks with higher yields, note that, among thousands of companies trading on U.S. stock exchanges, there are only 23 dividend kings.
Of course, past performance does not guarantee future results. Will the century-old consumer staples giant be able to continue its dividend increase track record?
Will PG Stock Increase its Dividend in 2018?
Well, dividends come from profits. In order for a company to pay sustainable dividends, it needs to generate recurring profits. And if the company wants to grow its payout, it better be growing its business, too. So let’s take a look at Procter & Gamble’s financials.
Procter & Gamble operates with a fiscal year that begins on July 1 and ends on June 30. In the company’s fiscal-year 2017, it generated net sales of $65.1 billion, which was unchanged from the previous year. However, note that the results were negatively impacted by foreign exchange headwinds. Excluding that impact, Procter & Gamble’s organic sales grew two percent, driven by an increase in shipment volume. (Source: “P&G Announces Fourth Quarter and Fiscal Year 2017 Results,” Procter & Gamble Co, July 27, 2017.)
The bottom line turned out to be more impressive. Excluding non-recurring items, core earnings of PG stock came in at $3.92 for the year, up seven percent from the prior year. And since Procter & Gamble declared and paid total dividends of $2.6981 per share in its fiscal 2017, the company achieved a payout ratio of 68.8%, leaving a sizable margin of safety.
Procter & Gamble’s growth momentum has translated to the current fiscal year. In the first and second quarter of the company’s fiscal-year 2018, P&G delivered core earnings growth of six percent and 10% year-over-year, respectively. (Source: “P&G Announces Second Quarter Earnings,” Procter & Gamble Co, January 23, 2018.)
Again, the company’s core earnings of $2.28 per share in the first six months of fiscal-year 2018 provided ample coverage of its $1.379 of dividends per share paid during this period.
Going forward, management expects Procter & Gamble to grow its organic sales by two to three percent in full-year fiscal 2018. Core earnings are expected to increase five to eight percent from its core earnings per share of $3.92 in fiscal-year 2017.
Procter & Gamble’s board of directors usually reviews its dividend policy every April. Given the company’s low payout ratio last year and the expected profit growth for the current year, I expect the consumer staples giant to announce a low- to mid-single-digit dividend increase next month.