Saturday, December 10, 2011

Proctor & Gamble (PG) 2011 Review


Proctor and Gamble (PG) 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:

(1) its aggressive expansion of its portfolio of brands through both acquisitions and new product development,

(2) its powerful marketing effort,

(3) expand rapidly into faster growing developing countries,

(4) emphasize a faster growing, higher margin product mix [e.g. health and beauty care products] and divest lower margin/non core operations,

(5) generates strong cash flow to not only finance the strategy described above but to also conduct a huge stock buy back program as well as raise its dividend every year.

Negatives:

(1) subject to commodity cost inflation,

(2) 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


Chart

Note: 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). 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.



http://finance.yahoo.com/q?s=PG

Steve Cook received his education in investments from Harvard, where he earned an MBA, New York University, where he did post graduate work in economics and financial analysis and the CFA Institute, where he earned the Chartered Financial Analysts designation in 1973. His 40 years of investment experience includes institutional portfolio management at Scudder, Stevens and Clark and Bear Stearns. Steve's goal at Strategic Stock Investments is to help other investors build wealth and benefit from the investing lessons he learned the hard way.