Procter & Gamble (PG) has not been the most dynamic stock in recent years. In fact, it has been a pretty lousy stock. The stock has basically gone nowhere in five years, making its hefty dividend yield — currently 3.3% — pretty much all investors have gotten out of the stock, asserts Chuck Carlson, dividend expert and editor of DRIP Investor.
The big problem for P&G is growth. It hasn’t had any. Revenues in fiscal 2018 ending in June were $67 billion. That’s down from $84 billion in 2013. True, P&G has divested certain brands over the last few years, but organic growth has been pretty minuscule.
But the latest quarter is showing some signs of life at the company. Organic sales jumped 4% in the first quarter of fiscal 2019, the biggest increase in five years. The surprising sales bump helped push the stock sharply higher on the earnings announcement.
It is still too early to call the recent sales surprise a trend, and the fiscal second quarter ending December will no doubt be closely scrutinized by investors as to the sustainability of this growth spurt.
But as a long-time shareholder of P&G, it’s good to see at least some signs of a growth pulse. The news should help provide some support to the stock, and these shares could see additional investor money should market volatility increase and investors move to perceived “safe haven” stocks like P&G.
Procter & Gamble enjoyed decent growth in the latest quarter across most of its categories. Overall, core earnings per share increased 3% in the quarter and were up 11% excluding currency. While the quarter was certainly a positive first-step, the firm still has challenges.
Indeed, despite the strong start to the fiscal year, P&G did not raise its guidance for organic sales growth for the year overall, which the firm expects to be in the range of 2%-3%. The company also maintained its expectations for core earnings per share growth of 3%-8%.
P&G stock jumped nearly 9% on the earnings announcement. Admittedly, while the news was positive, I was surprised by the magnitude of the rise, especially since P&G failed to raise guidance for fiscal 2019 and still faces plenty of challenges in its markets.
Still, for a stock that has been short on good news, the quarter provides some hope that the company’s strategic plan is gaining traction. It would be nice to see the stock break out strongly above its five-year high of just under $95.
That price breakout would provide further evidence that Wall Street believes the recent positive results are sustainable. Please note P&G offers a direct purchase plan whereby any investor may buy the first share and every share directly from the company. Minimum initial investment is $250.
