Linked here is a PDF copy of my analysis of Procter & Gamble Co. (PG) (alt.1, alt.2). Below are some highlights from the above linked analysis:
Company Description: The Procter & Gamble Company (P&G) is focused on providing branded consumer goods products. The Company markets its products in more than 180 countries.
Fair Value: I consider four calculations of fair value, see page 2 of the linked PDF for a detailed description: 1.) Avg. High Yield Price, 2.) 20-Year DCF Price, 3.) Avg. P/E Price and 4.) Graham Number. PG is trading at a discount to 1.) and 3.) above. If I exclude the high and low valuation, and average the remaining two valuations, PG is trading at a 12.9% premium. Since PG is trading at a price in excess of a 5% premium, a Star is deducted.
Dividend Analytical Data: In this section I consider five factors, see page 2 of the linked PDF for a detailed description: 1.) Rolling 4-yr Div. > 15%, 2.) Dividend Growth Rate, 3.) Years of Div. Growth, 4.) 1-Yr. > 5-Yr Growth and 5.) Payout 15% of avg. PG earned Stars in 3.) Years of Div. Growth above - it has increased its dividend for 10+ years.
Dividend Income vs. MMA: Why would you assume the equity risk and invest in a dividend stock if you could earn a better return in a much less risky money market account (MMA)? This section compares the earning ability of this stock with a high yield MMA. Two items are considered in this section, see page 2 of the linked PDF for a detailed description: 1.) NPV MMA Diff. and 2.) Years to >MMA. PG did not earn any Stars in this section. In fact, one Star was deducted since the NPV MMA Diff. was ($900) negative. This means for every $1,000 invested, on a net present value basis (NPV), you would be $900 better off by investing in a MMA at earning 4.61%.
Other: PG is a well-managed company that produces consumer staples. PG's ability to consistently grow its dividend over different economic cycles has made it a staple in most dividend investors portfolio.
Conclusion: PG lost one Star in the Fair Value section, earned one Stars in the Dividend Analytical Data section and lost one Stars in the Dividend Income vs. MMA section for a total of Minus-One Stars, which is one below my scale's floor of zero, which rates it as a 0-Star Avoid stock.
PG is one of those Blue-Chip stocks that I would love to have in my portfolio, but not at this price. Using my D4L-PreScreen.xls model I determined that the dividend growth rate would have to increase to 11.7% for PG's NPV of MMA Differential to reach $1,000. Alternatevely, the share price would have to fall an additional 18% for PG's NPV of MMA Differential to reach $1,000. Near-term, I see neither happening. I will continue to monitor PG for buying opportunities.
Disclaimer: Material presented here is for informational purposes only. The above quantitative stock analysis, including the Star rating, is mechanically calculated and is based on historical information. The analysis assumes the stock will perform in the future as it has in the past. This is generally never true. Before buying or selling any stock you should do your own research and reach your own conclusion. See my Disclaimer for more information.
Full Disclosure: At the time of this writing, I do not own shares of PG (0.0% of my Income Portfolio).
What are your thoughts on PG?
Recent Stock Analyses:
________________________________________________________________
Subscribe to:
Post Comments (Atom)
I have owned a small amount of PG for several years and I remember they had reorg after reorg. They now seem to have the company running well.
I do hope that its price drops a little more so I can get in. My fear with getting in like that is that I won't be able to continue buying if the price dips then goes back up. This was a frustration I had with KO.
Best Wishes,
D4L
Good company but over-priced. I like the proposed spin-out of Folgers, it may make the company easier to understand.