Proctor and Gamble PG investors?

[MichealKnight]

Hello Everyone....

Like many here I am hoping to find some quality dividend stocks with approximately a 5 year outlook. Doesn't have to be razzle-dazzle returns. If I could average 5-6% I'd be ecstatic.

PG keeps coming to mind, the dividend history and dividend increase history looks good.

The brands are strong, the moat I feel is decent - but I wonder if in coming years, online newbies like "Dollar Shave Club", etc- - can make a healthy dent in PG.

I see a 2.6% dividend and I'm thinking - - if I can collect that, then all I'm hoping for is the share price to appreciate about 3%, average year. Doesn't seem so outlandish.

Any thoughts on PG? Thanks

[NW-Bound]

Ah, you made me look. I have held PG from time to time, but don't remember if I have it right now.

Last time I bought it was in Jan 2021, due to a 136 put getting exercised. I sold it in May 2021, due to a 137 call getting exercised. While I had it, collected about 6% of principal from covered call premiums that I sold repeatedly until I "lost" the stock via the call.

I was distracted by my other holdings, and forgot about rebuying the stock via a put option. This, I may do tomorrow. It's now lower than when I sold.

PG is a good stable stock to hold long-term, and I have been able to "enhance" the dividend yield via writing options on it. If I can get 10%/year out of this I am happy. You don't get rich on it, but you don't get poor either.

[LarryMelman]

I think you need to really understand what your goals are in buying individual stocks. Why do you want to "average 5-6%" for 5 years? What does that mean? Are you just sick of getting no interest on cash in the bank, and want a better return? And what will you do after the 5 years?

In the late 1990's, I started dabbling in individual stocks. I don't even remember why. In 2005, I bought $5500 of PG. With dividends reinvested, it's now about $21K, 3.8 times my original investment which is 8.7% annual return for 16 years. I'm currently getting about $550/year in dividends. PG's average dividend growth rate over the last 5 years is 3.1% (this is an easy metric to find online). The dividend yield of PG is 2.5%, which is historically low, meaning that the stock is probably overpriced at this time.

From what you wrote, you'd be thrilled with that... but it pales in comparison to the same dollar amount of Home Depot that I bought in 22 years ago which has grown 13.3x - 12.5% a year for 22 years. It pays me $1550/year in dividends, and the 5-year average dividend growth is 24%. The yield is 2.1% - HD has never been a high yield stock, but its share price and dividend payment keep soaring.

Throughout the 2010's, I went whole-hog to a dividend stock approach, now owning about 100 different stocks. An advisor looked at my holdings recently and told me I was running my own index fund, tilted toward the dividend growth stocks. Dividends will fund my retirement. The stocks go up and down, but the dividends keep on coming.

So again... why do you want to buy PG? Do you have an overall plan?

I would also caution you that this is probably not a good time to buy these kinds of stocks. Yields are low which means prices are high.

[NW-Bound]

PG currently has a P/E ratio of 24.75, vs. 44.5 of the entire S&P 500. HD's P/E is 22.76, but HD is more economically sensitive than PG and other consumer staples stocks.

I buy these stalwart stocks not for their dividend as much as their stability and low P/E ratios, in order to serve as a ballast for my other more volatile stocks.

And of course, I like to enhance the return with option writing, which gets me more with not much more risk.

[erkevin]

I'm a stock guy with a portfolio mainly of Dividend Aristocrats including PG. As investors have pivoted away from tech stocks in 2021, Large Value stocks have been my focus:

https://www.suredividend.com/dividend-aristocrats-list/

An alternate thought would be ETFs that focus on dividends: SCHD, VYM

[target2019]

Noticed that PG was held by SCHD, making up 4.6% of the 100 companies in early 2020. However PG is not in the list of holdings downloaded today. Not sure why that would change.
https://www.schwabassetmanagement.com/products/schd

[RetireeRobert]

Quote:

Originally Posted by erkevin I'm a stock guy with a portfolio mainly of Dividend Aristocrats including PG. As investors have pivoted away from tech stocks in 2021, Large Value stocks have been my focus: https://www.suredividend.com/dividend-aristocrats-list/ An alternate thought would be ETFs that focus on dividends: SCHD, VYM

Interesting site. Thanks for posting a link.

[MichealKnight]

"So again... why do you want to buy PG? Do you have an overall plan?"

When I look at my nest-egg, my desired expenses, and what I want to end up with after kids college, etc.... the basic raw calculation for 40 years works - - -*if* I earn an average yearly return on equities of 5%. Yes, some years are down 20%, some up 20%....but average over the long term, I'd like 5%. Also I want to diversify asset classes and add to my physical real estate holdings because I just can't do 100% paper assets even though historically that has been profitable. Once I patiently buy some rental homes...

60% equities
25% cash
15% physical real estate

The real estate depreciation makes my income look lower - so I'd get a nice ACA subsidy, PLUS $6000 refundable tax credits if current proposals go thru - - I see that as free money.

In 5 years, I figure my 1st college kid bills start, and I'll downsize the ridiculous house I have now.

So....for the next 5 years, if my stocks can return 5% per year, and my cash/real estate returns 2% per year......I am not staying at the Four Seasons -- - but I'm living rather comfortabl.

Certainly mutual funds/etfs are a part of it.....but PG was just one of many examples of a company with good brands, history of good bosses, history of dividend growth and I consider it a bread-and-butter- stock, versus the latest sexiest thing.

So I am just trying to decide how realistic I am at hoping for a 2.6% dividend, plus average year 3% price appreciation which gets it to 5.6% and it's part of a family of equities that would hopefully give me the 5% returns.

I look at S/P history - and I feel that I'm looking for 5% nominal on something that historically returned 8%. I look at the rental homes, and I'm hoping for 2% appreciation per year vs the historical 3-5%.

I 'm hoping my expectations are realistic.

[Mr. Tightwad]

I bought this maybe 11 years ago. 600 shares at just under $60.

20 something brands that have a billion or more in sales.

[LarryMelman]

Quote:

Originally Posted by MichealKnight I 'm hoping my expectations are realistic.

Well IMO this is exactly the wrong time to bet your plan on near-term market performance. It is at historic highs (even the dividend stocks, maybe even especially the dividend stocks) and has been rising for over a decade. What would you do if we had another "lost decade" ahead? Or a couple of hard down years? I think we are overdue. The P/E of the S&P 500 is more than double its historical norms.

On the other hand, if you are in your 40's, you have plenty of time to build a portfolio. And you don't have to do it all today, you can slowly collect stocks (and income) over a decade or more like I did. However you mentioned a 5-year deadline.

With all that said, I have looked at SCHD which someone mentioned above. If I was starting over, maybe I'd go that route. However its present holdings are very similar to my hodgepodge of stocks, and for whatever reason, my personal dividend yield is higher. Over the last couple years, I've been piling up cash, waiting for the next opportunity.

[triangle]

I think they have already been hurt by Dollar Shaving Club and other low cost options like traditional wet shaving and their questionable marketing campaign a few years ago. I recall reading at the time that the personal grooming division (whatever it is called) had falling revenue, down from the prior year. That was when the stock was in the 80/90's, so whatever that affect might have been, it looks like it has passed. About that same time or maybe it started a few years prior to that, they started reducing some of their under performing brands. It was if they were competing too much with themselves and now have a more focused strategy.

Whether one holds PG,UL,CL,CHD I think they are fine as part of one's portfolio. Growing along with inflation, but always fighting upstarts if margins are raised.

[Another Reader]

I bought a few shares in a DRP maybe 25 years ago. Looks like I have around 25 shares worth around $3,600. Those DRP plans turned out to be a hassle. Will probably donate these shares if I can figure out how.

[38Chevy454]

I think if you are looking at it as an alternative to other fixed income type investments it is a pretty safe choice, with better returns. Some higher risk of course, but probably lower than overall market. For sure 5-6% per year (your numbers) is a lot better than most fixed income returns currently. But if you are looking at it as a equity type holding, it seems you can get better total return by just going with diversified funds. Especially since your time frame is 5 years for this money.


Now if you are considering the tax implications of this in a taxable account, then the (potentially favorable) dividend tax rate may make it an attractive choice in comparison to a straight diversified fund.