Are You Looking for a High-Growth Dividend Stock? Procter & Gamble (PG) Could Be a Great Choice
Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. But when you're an income investor, your primary focus is generating consistent cash flow from each of your liquid investments.
Cash flow can come from bond interest, interest from other types of investments, and of course, dividends. A dividend is the distribution of a company's earnings paid out to shareholders; it's often viewed by its dividend yield, a metric that measures a dividend as a percent of the current stock price. Many academic studies show that dividends make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.
Procter & Gamble in Focus
Procter & Gamble (PG) is headquartered in Cincinnati, and is in the Consumer Staples sector. The stock has seen a price change of -3.13% since the start of the year. The world's largest consumer products maker is currently shelling out a dividend of $0.79 per share, with a dividend yield of 2.35%. This compares to the Soap and Cleaning Materials industry's yield of 2% and the S&P 500's yield of 1.44%.
Looking at dividend growth, the company's current annualized dividend of $3.16 is up 4.4% from last year. Over the last 5 years, Procter & Gamble has increased its dividend 5 times on a year-over-year basis for an average annual increase of 3.94%. Any future dividend growth will depend on both earnings growth and the company's payout ratio; a payout ratio is the proportion of a firm's annual earnings per share that it pays out as a dividend. Right now, P&G's payout ratio is 59%, which means it paid out 59% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, PG expects solid earnings growth. The Zacks Consensus Estimate for 2021 is $5.59 per share, with earnings expected to increase 9.18% from the year ago period.
Bottom Line
From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. But, not every company offers a quarterly payout.
High-growth firms or tech start-ups, for example, rarely provide their shareholders a dividend, while larger, more established companies that have more secure profits are often seen as the best dividend options. Income investors must be conscious of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, PG presents a compelling investment opportunity; it's not only an attractive dividend play, but the stock also boasts a strong Zacks Rank of #2 (Buy).
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