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The Recently Recommended Monthly Stock Special
Recently Recommended

The recently recommended company is *The Procter & Gamble Co. (PG)....

Comparison PG (recently recommended stock of the month) vs SP500 (by Vanguard SP500 Index Fund) in the last 10 years.

Company Information:

Procter & Gamble Co. is a multinational consumer goods company headquartered in downtown Cincinnati, Ohio. Founded by William Procter and James Gamble in 1837, the Company operates in five segments: Beauty, including deodorants, cosmetics, skin care and grooming (blades, razors, electronic hair removal devices). Health Care, which includes products for oral care, personal health care, fabric care and home care, and baby, feminine and family care (diapers, baby wipe, pants, Bounty paper towel, and Charmin toilet paper). PG’s current total market capitalization of $182.1 billion makes it a mega cap stock (a mega capitalization stock has a market value of more than $100 billion) and its long history of consistent revenues and earnings growth makes it a solid company.

 

PG is considered a well-diversified business with a sustainable competitive advantage over its rivals. The firm enjoys an outstanding management and corporate culture. According to Market Watch, consensus estimates call for the company to earn about $4.19 per share this year, and to go to about $4.46 per share in 2019. Procter & Gamble has paid dividends to investors since 1891, and has increased its payments for 64 consecutive years, which makes it a dividend aristocrat. During the past three years, it has increased its dividends at an average rate of 4.0%, with its quarterly payment of $0.72 per share currently providing a yield of 3.83%.

 

The value of dividends reinvestment: A hypothetical investment in Procter & Gamble has grown cumulatively (including dividends reinvested) 6,197.23% during the past forty years. The same investment has grown only 2,677.99% in the same period of time, excluding dividends. The dividend is well covered by earnings, since its Dividend Payout Ratio (DPR) (dividend payments as a percentage of its earnings), is 74%. Its Price to Earnings (P/E) ratio (a measure of valuation) of 19.36 is 9.2% below the S&P 500® index and according to Morningstar, the stock is trading 26% below its Fair Value Estimate, making it attractive for investors with a long-term investment horizon

 

Technically (from the chart’s perspective) PG also looks attractive, trading 23.6% below its 52 weeks high. The index funds Vanguard Total Stock Market Index and Vanguard 500 Index are the biggest shareholders of PG, holding 2.5% and 1.8% of its shares respectively. The stock is also one of the 63 holdings of the mutual fund managed my Moneypaper Advisors, the MP 63 Fund (DRIPX). PG’s main competitors are Unilever PLC, Reckitt Benckiser Group PLC, and Colgate-Palmolive Co. PG’s Beta (a measure of the volatility, or systematic risk in comparison to the market as a whole as evidenced by the S&P 500 Index) is 0.38 so the stock is 62% less volatile than the Market.

 

Best and worst years during the past 10 years: Its best year was 2013, in which PG returned, including dividends, 23.4%. On the flip side, its worst year was 2008, when the stock declined 13.7% including reinvested dividends. Its dividend re-investment plan charges some fees for cash investing by mail ($2.50, plus 2 cents per share), however the plan charges no fees when investing through the Electronic Fund Transfer (EFT), which means that there is no fee if you authorize electronic transfers from your bank account to fund your DRIP account on a regular basis. The plan charges a tiny fee for dividend re-investment (2 cents per share purchased with dividends). To illustrate those fees at the current price: If the dividend reinvested were $100, the fee to reinvest would be about 2 cents. (The $2.50 fee only applies to optional cash investments made by check.) If you were to send a check to invest $100, the fee would be $2.52 ($2.50 plus 2 cents), which is 2.52% of the investment. To minimize the effect of even such small fees, you may want to invest a larger amount but less frequently. The fee for a $300 investment, for instance, would be $2.58 (or 0.86% of the investment). With the stock being fundamental and technically attractive, this may be an excellent entry point for investors with a longer-term investment horizon.

 

Disclosure: Mario Medina is a long-term investor in Procter & Gamble Co., and his investing strategy consists on investing small amounts periodically (also known as dollar-cost average or DCA), always with a long-term view. The author is the co-manager of the MP 63 Fund (DRIPX), which hold a position in the company. The author wrote the article himself and it expresses his own opinions. The author has no business relationship with PG and this article is not intended as a recommendation to invest as the information published does not take into account any subscriber's personal finances, goals or risk tolerance. Accordingly, you should be aware of all the risks associated with any financial investment, and should consult an independent financial advisor for any personal investment advice.

 

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