P&G Hikes Dividend for 61st Consecutive Year

P&G Hikes Dividend for 61st Consecutive Year
April 18, 2017

 
The American multinational FMCG company Procter & Gamble Co (NYSE: PG) is slated to report its fiscal 2017 third-quarter earnings on April 26th. Last week, as anticipated, the company raised its quarterly dividend by 3%. Other than a raise in the dividend payout, there are a number of factors which indicate an upside to the stock. The paragraphs below delve into the reasons which may lend support to the bullishness.

Last week, the board of P&G approved a quarterly cash dividend of 68.96 per share, payable to shareholders of record as on April 21, 2017. The declared dividend represents a 3% increase on y-o-y basis. The annual dividend works out to $2.7584 per share, including this dividend. Notably, this is the 61st consecutive year of dividend hike. P&G is one of those few companies which have increased the dividend payout on a yearly basis for at least two-and-a-half decades. The company leads the list of 25-year Dividend Increasing Stocks.

The Cincinnati –based company had reported free cash flow of between $10 billion and $11 billion for the past four years. Last year, P&G’s operating cash flow was $15.4 billion, while the capital requirement was only $3.3 billion. Thus, after capital expenditure, P&G was left with $12.1 billion in cash. This enabled the company to allocate considerable capital for brand development, acquisitions and innovations. P&G also did not face any issues in share repurchases due to huge free cash flow.

In the current fiscal year, the company has plans to not only repurchase $5 billion worth shares, but also disburse more than $7 billion in the form of dividend. In fact, P&G has ambitious plans to return up to $70 billion to investors through dividends and share repurchases.

To improve productivity and record organic growth, P&G is restructuring its supply chain, while investing in its brands. As a part of the restructuring plan announced in 2012, the company is implementing its plan to reduce non-manufacturing recruitment by 10% over the next five years. This is expected to generate cost savings of up to $10 billion in the period ranging from 2017 to 2021. The dividend hike coupled with strong cash flow and a healthy balance sheet is expected to keep the stock of P&G in a bullish orbit.

The price gap between 88.71 and 89.76, created on mid-February, was covered last week. The main and signal line of the MACD indicator has also made a bullish crossover. Thus, a short-term uptrend can be anticipated in the stock.

P&G - Technical Analysis - 18th April 2017

A binary trader can purchase a call option or its equivalent to gain from the forecasted rise in the stock’s value. The equivalent of call option should remain valid for a week and the suggested trade should be preferably taken when P&G trades near $90 in the NYSE.

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Andrew Wright

Prior to founding tradersasset.com in 2014, Andrew worked as a proprietary trader, then as a market maker. As a market maker, he traded options in over 100 stocks, he then began trading currency pairs in 2013. Andrew still actively trades both, and prides himself on educating and informing traders on the benefits of both Binary Options and Forex.


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