Proctor & Gamble (PG) 2013 Review

Proctor and Gamble is a major household products and cosmetics company marketing products in over 180 countries with three divisions:

(1) Beauty and Health products: Cover Girl, Max Factor, Olay, Old Spice, Clairol Nice ‘n Easy, Pantene, Head and Shoulders, Wella, Pert, Ivory, Safeguard, Zest, Secret, Right Guard, Always, Whisper, Tampax, Actonel, Prilosec OTC, Vicks, Scope, Pepto-Bismol, Therm-Care, Metamucil, NyQuil and Oral B,

(2) Household Care: Tide, Gain, Dash, Ariel, Downy, Frebreeze, Dial, Joy, Cascade, Swiffer, Mr. Clean, Crest, Iams, Eukanuba, and Pringles,

(3) Grooming: Gillette, Mach 3, Venus, Braun, Duracell,

            (4) Family and Baby Care: Pampers, Luvs, Charmin, Bounty, Puffs.

The company has grown earnings and dividends 9-11% for the last 10 years on a 15-17% return on equity.  Management’s expects to continue this record because of:

(1) its aggressive expansion of its portfolio of brands through both acquisitions and new product development,

(2) its powerful marketing effort,

(3) expand rapidly into faster growing developing countries,

(4) emphasize a faster growing, higher margin product mix [e.g. health and beauty care products] and divest lower margin/non core operations,

(5) generates strong cash flow to not only finance the strategy described above but to also conduct a huge stock buy back program as well as raise its dividend every year.

 Negatives:

(1) subject to commodity cost inflation,

(2) it is in an intensely competitive industry,

(3) sluggish growth in developed markets.

            PG is rated A++ by Value Line, has a 27% debt to equity ratio and its stock yields 3.2%.

Statistical Summary

                 Stock      Dividend         Payout      # Increases  

                 Yield      Growth Rate     Ratio       Since 2003

PG             3.2%          9%               58%             10

Ind Ave      2.5             9                  39                NA 

                Debt/                       EPS Down       Net        Value Line

                Equity         ROE      Since 2003      Margin       Rating

PG            27%           17%            3                 13%          A++

Ind Ave     44              26              NA               8              NA

     Chart

            Note: PG stock made good progress off its March 2009 low, quickly surpassing the downtrend off its September 2008 high (red line) but taking much longer to eventually close over the November 2008 trading high (green line).             Long term, PG is in an uptrend (straight blue lines).  Intermediate term, it is also in an uptrend (purple lines).  The wiggly blue line is on balance volume.  The Dividend Growth Portfolio owns a full position in PG, having recently made a switch out of CL into PG.  The upper boundary of its Buy Value Range is $70; the lower boundary of its Sell Half Range is $100.

 http://finance.yahoo.com/q?s=PG

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