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Procter & Gamble: It's Not a Gamble
08/09/2013 7:00 am EST
This company is not a gamble for investors; indeed, it is one of the most financially sound companies among the Dow 30, observes Mark Skousen, editor of Hedge Fund Trader.
Procter & Gamble (PG) is the leading consumer product company in the world; it is famous for its products in beauty, grooming, health care, fabric care, home care, baby care, and family care.
Everyone is familiar with Gillette, Tide, Pampers, Head & Shoulders, and Crest toothpaste, among its 100,000 consumer products. But P&G is aggressively introducing new products to stay ahead of the competition, and it recently introduced three of the top ten most successful new products last year.
One of the recent innovations of P&G is in the laundry segment. It was the introduction of detergent pods, which are easier to use, create less waste and have less potential for a mess.
This innovation has profited P&G, which is now selling more than $4.5 billion in laundry products in North America annually.
P&G has also been beating its competitors overseas. It now is a $32 billion business—38% of the company's revenue and 44% of its unit volume are generated from emerging markets.
Some of the countries that have contributed significantly to the company's profits are the BRIC countries—Brazil, Russia, India and China. There has been a 27% compounded annual growth in revenue in India and 25% in Russia with China being the greatest contributor to the sales.
In developing nations, such as India, Procter & Gamble is all set to establish its toothpaste brand Oral-B Pro Health against its biggest competitor, Colgate. To achieve its aim of increasing market share, the company has used a popular Indian actress, Madhuri Dixit, to endorse the product.
P&G reported earnings on Thursday, August 1, and as I expected, the company beat the Street's estimates. The company has enjoyed a steady rise in revenues (currently around $84 billion), and profit margins have risen to 15%. Return on equity exceeds 17%.
I especially like the company's rising dividend policy—now in its 56th year! P&G pays 60.2 cents a quarter and has been repurchasing $46 billion shares. Current yield is 3%, one of the highest among Dow stocks.
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