2021 Week 20: Procter & Gamble (NYSE: PG)

Portfolio Update

The FiveTwenty portfolio received $50.70 in dividends in the past week. ABBV paid its quarterly dividend during the week.

Past Week Dividend$50.70
Current Quarter Dividend (Q2 2021)$100.49
LifeTime Dividend$213.53
Estimated Annual Dividend$1,570.63
Dividend Scorecard

The capital allocation for the week of 05/16/2021 to 05/22/2021 will be used to add to our position in Procter & Gamble (NYSE: PG)

PG – Position Update

Since our last check-in on PG in week 16 of 2021, the company reported Q3 2021 earnings on 04/20/2021. Furthermore, following the earnings report and the ex-div date of 04/22/2021 the share price has dropped 0.55% from $137.25 to $138.01.

TTMPrev. Update10-year median
Dividend Streak65 years65 years
Yield2.35% (MRD 2.52%)2.30% (MRD 2.53%)3.02%
Payout Ratio56.94%156.42%2NA
P/E24.25124.502NA
Entry Criteria Scorecard

1 computed using TTM adjusted EPS of $5.69 as of Q3 2021
2 computed using TTM adjusted EPS of $5.60 as of Q2 2021

Q3 2021 earnings report

Did PG’s latest earnings report raise any warning flags?

In Q3 2021 (PG’s financial year runs from July to June), PG grew revenue, adj. net income, and adjusted (aka core) EPS over the same period a year ago. Four of the company’s business segments – Beauty; Grooming; Health Care; and Fabric & Home Care – saw organic sales growth of 3-7%. The Baby, Feminine & Family Care segments saw a decline of -1% compared to the year ago quarter. Overall, revenues grew 5%, adjusted net earnings increased 6.9%, and adjusted EPS were 8% higher compared to Q3 2020.

Revenue
(in millions)
Adj. net income
(in millions)
Adj. EPS
.
Q3 2020$17,214$3,058$1.17
Q3 2021$18,109$3,269$1.26
% Change5%6.9%8%

Additional noteworthy developments during the quarter:

  • PG returned $5 billion of cash to shareholders during the quarter. It payed out $2 billion in dividends and repurchased $3 billion worth of common shares.
  • The company experienced improvements in profitability metrics compared to the same period a year ago. The improvements were driven by a decrease in restructuring costs and increases in productivity.

Looking ahead, PG maintained it’s previous outlook for FY 2021. The company expects full year organic sales growth of 8-10% and adjusted (core) EPS growth 8-10%. Additionally, PG increased its estimate for stock repurchases for $10 billion to $11 billion, which combined with $8 billion in dividend payouts brings the total estimated cash returned to shareowners to $19 billion for FY 2021.

Thesis

Why are we adding to our position in PG?

PG’s Q3 2021 results have continued the trends from the first 2 quarters. They offer an additional data point supporting the opinion that the reorganization the company completed in 2017 continues to prove beneficial to the overall company.

With no surprises since our initial investment, we continue to believe that PG is a safe source of growing dividends for years to come.

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