Sivy on Proctor & Gamble
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Michael Sivy has touted Proctor & Gamble a few times in recent articles. However, in this article he is really laying it on strong. And I hope he is right as I am a PG shareowner, for many of the reasons he speaks about within the article.
1. P&G is the world’s largest consumer products company with 22 billion-dollar brands. The diverse product mix includes health and beauty items, household products, snacks, razor blades and batteries.
2. Profit margins are fat, and P&G has thrown off more than $12 billion in cash over the past year.
3. In the most recent quarter, sales grew 27 percent, compared with a year earlier, thanks to the 2005 acquisition of Gillette. Not counting Gillette, sales were up a healthy 6 percent.
4. Earnings per share rose almost 10 percent, after adjusting for dilution caused by the acquisition.
5. P&G stock now pays a 2 percent yield, and the company has raised dividends for 50 consecutive years, one of the longest records among blue-chip companies.
He goes on to say the shares may be fully priced. I think they are there, but I am always looking for a bit of a pull back to add more. My buy price is somewhere between $44 – $57. If it pulls back to the $57 number I hope to start adding. However, the trouble with powerful stocks like PG, is they don’t pull back too often. It then depends what sort of premium you are willing to pay for growth and growing dividends.
3 Comments on this post
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yielder said:
Don’t know what Sivy bases his the shares are fully priced comment on but my model says it’s not as do a couple of others – http://makeashorterlink.com/?N27F24A2E
Over the past 10 years eps have grown at 10% and have been incredibly smooth. Five year growth has been a bit higher at 10.6%. Assuming that the Gillette pushes the growth a bit higher, let’s use a growth rate of 11%. Over the past 10 years, the average high multiple has been 28.8x. Exclude the multiple expansion years from 1997 through 2000 and the high multiple is 24x.
Using 2005 diluted earnings of $2.64, a PE of 24, and a growth rate of 11, gives a price of $70. That’s a return of 11%. Toss in the dividend for a total return of ~ 13%
And this is a very short run view of a company that has increased its dividend for 50 consecutive years.
November 14th, 2006 at 6:27 am -
StingyFinance said:
This may be a little off topic, but do you keep your dividend investing stocks in your registered or non registered account?
November 14th, 2006 at 8:04 am
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