This article was originally published on Kiplinger – https://www.kiplinger.com/
Market value: $199.4 billion
Dividend yield: 3.5%
Five-year average yield: 3.4%
Another favorite holding for low-risk investors is Procter & Gamble (PG, $78.52). The consumer goods giant sells many different products under 65 brands such as Luvs, Pampers, Cascade, Crest and Gillette.
P&G’s operations span the globe and give the company a major presence in numerous consumer product categories, including beauty, grooming, health care and home care. In short, it’s a force to be reckoned with.
By focusing deeply on consumers’ needs, developing innovative products, and spending heavily on marketing, Procter & Gamble has delivered noteworthy results for income growth investors over time. Most notably, P&G has paid uninterrupted dividends for 127 straight years while growing its payout in each of the last 61 years.
Procter & Gamble has become somewhat of a victim of its own success in recent years. Organic growth has been challenged due in part to the company’s sheer size, the rise of private-label products and less focused investment in marketing and innovation. But P&G embarked on a bold turnaround plan by reducing its 170 brands to just 65 and focusing on only 10 product categories rather than 16. These are faster-growing, higher margin businesses where P&G typically enjoys dominant market positions.
Erin Lash, CFA, director of consumer sector equity research for Morningstar, is optimistic about the firm’s chess moves, writing, “While the market’s confidence in P&G’s ability to drive accelerating sales growth (to a mid-single-digit level over the next several years) has yet to take hold, we think P&G is poised to increase underlying sales at a 4% clip in the longer term, with nearly two thirds of its annual growth from increased volume and the remainder from higher prices and improved mix.”
A structural improvement in P&G’s growth would bode well for future dividend increases, making the stock’s above-average yield all the more interesting today.