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Summary

  • On Monday, April 7, Procter & Gamble announced that it was increasing its quarterly dividend by 7% or $0.0421/share.
  • Comparative Forward P/E ratios set Procter & Gamble apart from a number of its peers.
  • Recent trend behavior signals a buying mode for most long-term investors.

When a company raises its dividend, potential income-driven investors tend to be a bit more interested as to what may be going on with that particular company. With that said, I not only wanted to examine the most recent dividend increase by Procter & Gamble (NYSE:PG), but also highlight a number of reasons behind my decision to remain bullish on shares of this particular personal products play.

Company Overview

With its operations based in Cincinnati, Ohio, The Procter & Gamble Company, together with its subsidiaries, manufactures and sells branded consumer packaged goods. The company operates through five segments: Beauty, Grooming, Health Care, Fabric Care and Home Care, and Baby Care and Family Care.

Procter & Gamble Increases Its Quarterly Dividend 7%

On Monday, April 7, Procter & Gamble announced quarterly dividend increase of $0.0421/share which brings its upcoming dividend payout to $0.6436/share. It should be noted that the increase will be paid on May 15 for shareholders of on April 25. Not only does this boost represent a 7% increase from its prior dividend of $0.6015/share (paid on February 18), it was also slightly higher than its previous increase of $0.0395/share that was announced on April 15, 2013.

Procter & Gamble Has Demonstrated Solid Dividend Growth Over The Past 5 Years

Since April 22, 2009, the company has increased its quarterly distribution five times over the past 60 months (including the company's most recent increase that was announced on April 7) which translates into an average annual dividend growth rate over that particular period of approximately 9.254%. From an income perspective, the company's forward yield of 3.19% ($2.57) coupled with its 5-year dividend behavior certainly make this particular stock a very viable income option for long-term investors in search of a higher- yielding personal products play.

Recent Performance & Trend Behavior

On Monday, shares of PG, which currently possess a market cap of $218.24 billion, a forward P/E ratio of 17.62, and a dividend yield of 3.19% ($2.57), settled at a price of $80.49/share.

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Based on their closing price of $80.49/shares, shares of PG are trading 1.34% above their 20-day simple moving average, 2.58% above their 50-day simple moving average, and 1.74% above their 200-day simple moving average. It should be noted that these numbers indicate a short-term and mid-to-long term uptrend for the stock, which generally translates into a buying mode for most near-term traders and many long-term investors.

Comparative Forward P/E Ratios Set Procter & Gamble Apart From Its Peers

Although the above referenced numbers indicate a long-term uptrend for the company's stock, I actually think its share price of $80.49/share offers investors a considerable point of entry. Why? Well, I think that when shares are trading at a much better forward P/E ratio than their sector-based peers, a great buying opportunity is created for most long-term investors.

As of Tuesday's close, Procter & Gamble's forward P/E ratio of 17.62 was much lower than the forward P/E ratio of both Colgate-Palmolive (NYSE:CL) (forward P/E ratio of 19.58 as of 4/7) and Estee Lauder (NYSE:EL) (forward P/E ratio of 20.82 as of 4/7), which signals a greater level of affordability for those who may be looking to establish a position in Procter & Gamble, especially when compared to a number of its peers.

A Look Ahead To Procter & Gamble's Upcoming Earnings

When it comes to the company's upcoming earnings, there are a number of things potential investors should consider. For example, analysts are currently calling for PG to earn $1.02/share in terms of EPS for its FQ3 earnings that are due out on April 23 (which is $0.19/share lower than what the company had reported during FQ2 2013 and $0.03/share higher than the company had reported during the year ago period).

In order to meet and or exceed its quarterly EPS estimates, I'd like to see an increase in the company's gross profit (within the range of at least +1% on the low side and +2% or more on the high side), a fair increase in operating income within the range of 1.1% on the low side and 1.4% or more on the high side), and lastly an increase in the organic sales in each of the five segments the company is divided up into in this instance I'm looking for at least a 1% on the low side and a 1.5% or more increase on the high side). If the above mentioned criteria is met and or exceeded, there's a very good chance that current EPS estimates could be surpassed.

One of the things both potential investors and existing shareholders should note is the fact that forex-related volatility in places such Argentina and Turkey could have an adverse effect on the company's FY14 performance. As it was previously noted on February 11, and although the company still sees a 3%-4% increase in organic revenue growth and a 12%-14% increase in its core EPS performance, I'd keep a watchful eye on these currencies as they could have a very unfavorable impact on the company's long-term earnings performance.

Conclusion

For those of you who may be considering a position in the Procter & Gamble, I strongly recommend keeping a close eye on the company's recent trend performance, its ability to continue to maintain its dividend, and its ability to continue to enhance shareholder value over the next 12-24 months, as each of these factors could play a role in the company's long-term growth.

Source: As Procter & Gamble Ups Its Dividend, Here's Why I Like The Stock