Return to flip book view

S T. J A M E S I N V E S T M E N T A D V I S O R S St. James Investment Advisors – 1-800-966-9343 – www.stjamesia.com Procter & Gamble (PG) Business Overview Procter & Gamble is the world’s largest consumer product manufacturer within the household and personal products industry. Procter & Gamble is focused on providing branded consumer packaged goods globally to its customers in approximately 180 countries and territories through five business segments: Beauty; Grooming; Health Care; Fabric & Home Care; and Baby, Feminine & Family Care. Procter & Gamble has many leading and recognizable brands with over 20 products that generate more than $1 billion in annual global sales. Procter & Gamble distributes its products through mass merchandisers and distributors, membership club stores, department stores, baby stores, grocery stores, special beauty stores, pharmacies, and e-commerce. Procter & Gamble had 2022 revenue of approximately $82.01 billion along with a current market capitalization of $359.58 billion. Why own Procter & Gamble? Procter & Gamble provides high-quality products through innovation that are viewed by consumers as premium. Procter & Gamble has been able to create and extend its competitive advantage through superior product performance, brand communication, consumer value creation, packaging initiatives and collaborative retail execution (in-store and e-commerce). We continue to have a very positive outlook on Procter & Gamble given its prudent strategy to rationalize its product mix, remove excess costs and reinvest in its intangible brand assets in order to continue to return cash to its shareholders. We expect Procter & Gamble will still carry significant clout with its retailers as well as retain its cost-based advantages while simultaneously becoming a more streamlined version of this leading global household and personal products company.

S T. J A M E S I N V E S T M E N T A D V I S O R S St. James Investment Advisors – 1-800-966-9343 – www.stjamesia.com Dividend Analysis Procter & Gamble presently has a dividend yield of 2.44% and has increased the dividend continuously for the past 66 years. Procter & Gamble has increased its annual dividend by 4.8% annually over the last 10 years and currently pays $3.76 per share. Procter & Gamble has a buyback yield of 2.06% for a Total Yield of 4.50%. Near Term Challenges The greatest challenge that Procter & Gamble currently faces is increasing competition from other manufacturers as well as store brands (e.g., Costco’s Kirkland Signature brand). As macroeconomic headwinds put more pressure on consumers, this could put a strain on the brand loyalty Procter & Gamble has built up. However, we are encouraged that management realizes the need to remain competitive and innovative across all price tiers, allowing the company to trade consumers up and down within its brand set. Valuation and Expected Returns Jon Moeller is the current Chairman and CEO of Procter and Gamble, succeeding David Taylor in November of 2021 after having been a part of Procter & Gamble’s leadership team for over two decades. He continues to refocus the company across its core sector business units to create more accountability, better align the firm’s resources and drive decision-making closer to the consumer. Procter & Gamble has a current return on equity of 31.34% and has an annual 5-year return on equity growth of 24.65%. During the last twelve months Procter & Gamble reported earnings-per-share of $5.90 along with an operating and net margin of 22.11% and 17.52% respectively. We expect 4% to 6% earnings growth along with dividend growth of 3% to 5% on their current dividend yield of 2.44% for total returns of 7% to 9% per year. Our fair value estimate for Procter & Gamble is $163.00 per share. We believe Procter & Gamble is currently undervalued by 8% based upon the current stock price of $151.783. Procter & Gamble has experienced more change in the past year than many investors would normally associate with a blue chip, however, Procter & Gamble remains a global consumer products giant, an extremely high-quality business with a reliable and growing dividend and should offer solid returns over the next 3 to 5 years. IMPORTANT DISCLAIMER The information contained herein has been obtained from sources believed reliable but is not necessarily complete, and accuracy is not guaranteed. This information is intended for educational purposes only. It is not intended to provide any investment advice or provide the basis for any investment decisions. You should consult your financial adviser prior to making any decision based on any specific information contained herein. Past performance does not guarantee future results. Redistribution is prohibited without permission. All information to include price quotes as of August 22, 2023.