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P&G's Attractive Dividend Should Continue to Grow

Wide-moat Procter & Gamble's attractive valuation and prioritization of returning capital to shareholders is a winning combo for investors.


Erin Lash: Wide-moat Procter & Gamble pays one of more attractive dividends across the household and personal care landscape with a dividend that yields north of 3% annually, far in excess of the low single digits it's peers boast. From our vantage point, P&G's commitment to returning excess cash to shareholders is evident in the fact that its paid a growing or stable dividend for nearly 130 years. We anticipate that it will continue to prioritize returning excess cash to shareholders. As we forecast, its dividend will grow at a mid- to high-single-digit clip annually over the course of the next 10 years.

Looking back, P&G has focused more recently on further bolstering its competitive position by shedding more than half of its brands as a means by which to focus on its highest return opportunities, while also also extracting excess costs, the combination of which we think stands to bolster profitability and further free up funds for the firm to allocate to bolster shareholder returns. As such, we forecast that P&G will direct around 70% of its annual earnings toward the payment of dividends for the benefit of shareholders going forward.

Erin Lash does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.