Key points
- Procter & Gamble is a Dividend King worth betting on.
- The company is well positioned in the market and exceeds consensus figures.
- The guidance expects an increase in repurchases adding to capital returns in 2023.
- 5 stocks we like better than Procter & Gamble
Procter & Gamble NYSE: PAGE The third-quarter report echoes news other Dividend Kings have reported this week. The report is a shining example of why Dividend Kings, Dividend Aristocrats and dividend growth stocks like Procter & Gamble, Clorox New York Stock Exchange: CLX AND Original spare parts company New York Stock Exchange: GPC they are great investments for long-term holders. Not only do they have the foresight to manage their businesses to support annual distribution growth, they also have the operational leverage to stay ahead of the curve.
Today that means cutting costs, improving efficiency and focusing on consumer satisfaction. For PG investors, this means outperformance, improved margins, robust cash flow and increased guidance. This catalyzes the rise in stock prices, putting this stock on track to hit another all-time high soon.
Procter & Gamble still has pricing power
The latest retail sales data suggests that American retailers are losing their grip on pricing power, but that’s not true of consumer staples stocks or Procter & Gamble. The company reported revenues of $20.07 billion for the FQ3 period, up 3.5% and beating analyst consensus by 380 basis points. The gain was driven by strong sales across all segments, led by 9% growth in Healthcare and Fabric & Home. All segments grew at least 6%, supported by a 10% system-wide increase in realized prices. A 3% drop in volume offset the price increase, Procter & Gamble is not immune to the conditions, but this was not enough to offset prices and led to growth.
Procter & Gamble managed to expand its margin, but not enough to fully offset rising costs and forex-related woes. Gross margin grew by 150 basis points and operating margin by 40, resulting in a 220 basis point increase in adjusted earnings. Adjusted earnings of $1.37 are up from $1.34 last year, beating the Marketbeat.com consensus by 380 basis points. The point is that the strength of the bottom line has trickled down to the bottom line and led to more guidance.
Procter & Gamble kept its EPS forecast stable amid continued economic pressures, but raised its revenue and cash flow forecasts. The company expected revenue growth close to 1% versus previously -1%-0% with cash yields increasing. The company plans to repurchase at least $7.4 billion in shares this year, up $1.4 billion at the low end of the range. The $1.4 billion increase represents a 23% premium to the buyback floor and 0.4% of market capitalization. The new low is worth 2% this fiscal year, plus the 2.5% dividend.
Procter & Gamble’s dividend is worth every penny
Procter & Gamble isn’t the lowest value in the consumer staples sector, and it’s not the best return, but the 2.5% payout is worth every penny of the 25X earnings you pay for it. Procter & Gamble is among the largest blue-chip dividend payers and is as reliable as it gets. You may find a higher return with names like Kraft Heinz NASDAQ: KHC, but they carry higher risks. If the sell side can be used as an example, they think the stock is worth buying. Institutions own about 62% of it, which is a lot for such a popular name, and they are buying.
Analysts could also act as a catalyst for rising prices. They see it as a Moderate Buy with a price target that assumes fair value at the current level. The third-quarter report could inspire price target upgrades and/or increases that would take the stock to, if not higher, all-time highs.
You want to view the monthly chart for this stock because the daily and weekly charts show a lot of noise. The monthly chart shows a clear upward trend and an increase in the market after confirming this trend. Assuming the market follows this trend, this stock should hit an all-time high in the coming months. 
Before you consider Procter & Gamble, you’ll want to hear this.
MarketBeat tracks daily Wall Street’s highest-rated and best-performing research analysts and the stocks they recommend to their clients. MarketBeat identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market takes hold… and Procter & Gamble wasn’t on the list.
While Procter & Gamble currently has a “Moderate Buy” rating among analysts, top-rated analysts believe these five stocks are better buys.
View the five stocks here
Need to extend your 401K or Roth IRA plan? Use these time-tested investment strategies to increase the monthly retirement income generated by your stock portfolio.
Get this free report