Procter & Gamble: Dividends And Growth With Some Defensive Flair

Dec. 8.11 | About: The Procter (PG)

By Mark Bern, CPA CFA

How can anyone who is retired and collecting dividends not like Procter & Gamble (NYSE:PG)? If we look around the house (anyone of us) we will undoubtedly find PG products in the laundry, the bathroom or the kitchen (maybe all three). What other company has infiltrated our everyday lives as well (other than maybe Starbucks)?

But really, what other company produces more stuff that we “all” use on a regular basis than PG? Think about just the 50 leadership brands of which 24 produce annual sales over $1 billion each: Ace, Always/Whisper, Ariel, Bold, Bounce, Bounty, Braun, Cascade, Charmin, Clairol, CoverGirl, Crest, Dash, Dawn/Fairy, Doce & Gabbana, Downy/Lenor, Duracell, Eukanuba, Febreze/Ambi Pur, Fixodent, Fusion, Gain, Gillette, Head & Shoulders, Herbal Essences, Hugo Boss, IAMS, Luvs, Mach3, Max Factor, Mr. Clean & Mr. Proper, Olay, Old Spice, Oral-B, Pampers, Pantene, Prestobraba/Blue, Prilosec, Pringles, Puffs, Rejoice/Pert, Safeguard, Secret, SK-II, Swiffer, Tampax, Tide, Venus, Vicks and Wella. I just went into the laundry room and counted six of these brands in my home. I’m sure there are others. I named them all here because just saying the number 50 somehow doesn’t conjure up the same effect.

Now what is really amazing is when we consider that over the past 16 years PG has had 132 of its products that made the Symphony!RI Group’s list of the year’s 25 most successful new products. That’s one third of all the most successful products introduced in the last 16 years. If you add up all the products from PG's top six competitors the total is less than 132. And as sure as the sun will rise tomorrow there will more in the future. I looked at PG’s 2000 annual report for perspective. It had just 10 brands with revenues over $1 billion per year each in that year. Now it has 24 brands that have reached that figure. That means PG developed 14 more brands into $1 billion in annual sales. And they will probably do that again over the next 11 years. The company has over 250 brands worldwide.

PG sells its products in more than 180 companies around the globe. That is tremendous reach. The company is expanding in emerging and developing markets like India and China and constantly introducing new brands to customers in developed countries ... think Swiffer. More than 45% of revenue comes from outside the U.S. and that percentage will continue to grow as hundreds of millions of new consumers begin to improve their lives. And, for the first time in history, those hundreds of millions of people will be able to afford to be consumers of PG products.

Think in terms of the populations in China, India, Brazil and Indonesia. The middle class in these countries just expanded over the last decade by more than the entire population of the U.S. New consumers are being created around the world at an unprecedented rate and PG is perhaps better positioned to take advantage of that trend than any other company on the face of the earth. Of course, that’s just my opinion. But you can see what gets me excited, right?

The company has an S&P credit rating of AA and pays a dividend of 3.2%. It may seem old school and boring to some but I own it and I’m glad I do. Whenever I think that I may be able to do a little better with another company I just remind myself of one thing: 55 consecutive years of dividend increases.

Disclosure: I am long PG.