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The Procter & Gamble Company Message Board

follansdave 3 posts  |  Last Activity: Mar 21, 2016 8:40 PM Member since: Jan 29, 2008
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  • Reply to

    Dividend increase thoughts

    by docleaf02 Mar 7, 2016 5:39 PM
    follansdave follansdave Mar 21, 2016 8:40 PM Flag

    Doc:
    I don't spend much time on this board anymore, but it is good to speak with you again since I know you are sincere and serious in your posts.
    I have not researched Duracell specifically so I'll answer your question more generally as best as I can.
    The kinds of businesses PG buys, owns, or sells are valued by the stock market as a function of the expected future cash flows (mostly earnings) of the business. You can break that down in various ways - current earnings are expected to grow or decline depending on the prospects of the business - which in itself is a function of product competitiveness, costs, market growth, etc. So, while this is somewhat mathematical, it involves a fair amount of judgment and complexity.
    For a company like PG, they generate relatively high profit margins and cashflow but little or no market or share growth.
    They bought businesses like Duracell with a belief that they could apply technology and marketing and make them grow faster and after trying that for a while came to the conclusion that wasn't going to work. At that point, they decided to divest.
    Classic financial theory would hold that a company should retain cash generated from their business (or from divestitures) as long as they believe they can reinvest it in the business at an attractive return - otherwise, they should return the cash to shareholders in the form of dividends or share repurchases - the latter having the advantage of being non-taxable to shareholders and not increasing expectations that they are sustainable forever. This is what PG is doing and I believe it is the proper course.
    Having said that, the Company has some serious long term issues which they still haven't solved - mainly how to take a huge established business base that they have and find a way to produce real business growth - which has been a problem for years and continues.
    Good luck.

  • Reply to

    Dividend increase thoughts

    by docleaf02 Mar 7, 2016 5:39 PM
    follansdave follansdave Mar 21, 2016 3:09 PM Flag

    Where do you get such incorrect data? Shares outstanding are down from 3.3B in 2006 to about 2.8B now. It would be easy to find places to criticize PG for not doing better but this wouldn't be one of them - a healthy and growing stream of dividends plus share buybacks while maintaining a very strong credit rating. The business throws off a lot of cash and the company has committed aggressively to return a lot of it to shareholders in this manner.

  • Reply to

    The new CEO is selling PG

    by jcjc3698 Feb 26, 2016 1:28 PM
    follansdave follansdave Feb 29, 2016 4:00 PM Flag

    Are you serious? Have you seen the data? 95% plus of the business is being retained - the pieces being sold are tiny relative to the whole and were not growing. And this plan was put in place before the new CEO took over. This is long overdue. There are issues at PG but this isn't one of them.
    Oh and by the way - these sales won't impact CEO compensation - so wrong again.

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