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Procter & Gamble is a major household products and cosmetics company marketing products in over 180 countries, with three divisions:

  1. Beauty and Health products: Cover Girl, Max Factor, Olay, Old Spice, Clariol Nice ‘n Easy, Pantene, Head and Shoulders, Wella, Pert, Ivory, Safeguard, Zest, Secret, Right Guard, Always, Whisper, Tampax, Actonel, Prilosec OTC, Vicks, Scope, Pepto-Bismol, Therm-Care, Metamucil, NyQuil and Oral B;
  2. Household Care: Tide, Gain, Dash, Ariel, Downy, Frebreeze, Dial, Joy, Cascade, Swiffer, Mr. Clean, Crest, Iams, Eukanuba, Pampers, Luvs, Charmin, Bounty, Puffs, Pringles, Folgers, and Sunny Delight;
  3. Gillette: Gillette, Mach 3, Venus, Braun, Duracell.

The company has grown earnings and dividends 10-11% for the last 10 years on a 15-17% return on equity. Management’s expects to continue this record because of:

  • Its aggressive expansion of its portfolio of brands through both acquisitions and new product development;
  • Its powerful marketing effort;
  • Expanding rapidly into faster growing developing countries;
  • Emphasizing a faster growing, higher margin product mix (e.g., health and beauty care products) and divesting lower-margin/non-core operations;
  • Generates strong cash flow to not only finance the strategy described above, but to also conduct a huge stock buyback program ,as well as raise its dividend every year.

Negatives:

  • Subject to commodity cost inflation;
  • It is in an intensely competitive industry.

PG is rated A++ by Value Line, has a 25% debt to equity ratio, and its stock yields 3.3%.

Statistical Summary

Stock Yield

Dividend Growth Rate

Payout Ratio

# Increases Since 2001

PG

3.3%

8%

47%

10

IND*

2.4

9

40

NA

Debt/Equity

ROE

EPS Down Since 2001

Net Margin

Value Line Rating

PG

25%

18%

2

14%

A++

IND*

36

19

NA

13

NA

*IND (industry) is the average of the Household Products Industry as complied from Value Line.

PG stock made good initial progress off its March 2009 low, quickly surpassing the down trend off its September 2008 high (red line); though it took much longer to successfully challenge the November 2008 trading high (green line) and has just barely managed to stay above that level. The stock is in a long term trading range (straight blue lines) as well as an intermediate term trading range (the purple line is the lower boundary; the higher straight blue line is the upper boundary). The wiggly blue lines are Bollinger Bands. The Dividend Growth Portfolio does not own PG by virtue of having sold it in October 2008 and reinvested the funds in Colgate-Palmolive (NYSE:CL). The stock has remained in a trading range for four years. With the stock near its trading high, we would not make a commitment at current levels.

Source: Don't Buy Procter & Gamble Until It Retreats Or Breaks Out