Procter & GamblePG163,46 $
Procter & Gamble (NYSE: PG) is an American manufacturer of health and personal care products. The company's products are sold in more than 180 countries.
About company
Procter & Gamble sells and manufactures all kinds of essentials, which is divided by 5 business units: household products; Women, children's and products for the whole family; cosmetic products; personal care and healthcare products. Key buyer of goods P&G stands for Walmart, his share is 15% in general sales.
Household goods. The segment brings the company 33% from all income and is engaged in the sale of household chemicals: laundry detergents, dishwashing products and other products under Ariel brands, Tide, Fairy and the like.
Women, children's and products for the whole family. The second largest division of the company, who earns 25% of the overall result. Main products of the segment: feminine hygiene products, baby diapers, diapers, toilet paper.
Cosmetic products. The segment brings companies about 20% income and is engaged in the production of shampoos, hair conditioners, means for creating hairstyles, Antiperspirants, deodorants and more.
healthcare. A small area of activity, which brings P&G about 14% earnings. The segment's products include: oral care products, medications, Vitamins, minerals and additives.
Self care products. Smallest Business P&G, which takes less 10% in general sales of the company. The main products of the segment are shaving and haircut products..
Production. In total P&G owns 105 production sites. 23 of which are located in 17 U.S. States, and the rest 82 assets - c 36 other countries. Not all properties are owned by the company: some she only leads.
Sales structure, billion dollars
| Revenue | share | |
|---|---|---|
| Household goods | 6,972 | 33% |
| Women, children's and products for the whole family | 5,116 | 24% |
| Cosmetic products | 3,926 | 19% |
| healthcare | 2,976 | 14% |
| Self care products | 1,811 | 9% |
| Other revenue | 0,152 | 1% |
| Overall result | 20,953 | 100% |
Dividends and share buybacks
One of the main advantages of the company is dividends.. P&G has been paying dividends to shareholders for over 132 years and gradually increasing them. For example, if we take statistics for the last 10 years, then the payoffs P&G on average grew annually by 5%, and in 2021 10% thanks to good financial results. The current dividend yield is 2,2%.
In addition to regular payments, the company conducts buyback of shares. In 2020 P&G buys back $11 billion worth of shares. In 2022, about $10 billion will be sent for buyback, and on dividends - over 8. The predicted profitability of 2022, taking into account the buyback, will be 5%.
Dynamics of dividend payments
| 2017 | 2,70 $ |
| 2018 | 2,79 $ |
| 2019 | 2,90 $ |
| 2020 | 3,03 $ |
| 2021 | 3,24 $ |
2,70 $
Current results
Procter & Gamble shows stable results from year to year and earns an average of about $18 billion in EBITDA. Due to the gradual growth of financial indicators, dividend payments are also increasing..
In 2022 the leadership of P&G expects continued growth in financials, mainly due to high demand for the company's products. The main forecasts are as follows::
- revenue will increase by 3-4%, up to 78.401-79.162 billion dollars;
- net earnings per share will grow by 6-9%, to 5.83-6 $, and the adjusted indicator - by 3-6%, to 5.83-6 $;
- effective tax rate will be in the range of 18 to 19%;
- capital expenditures will amount to 4-5% of total revenue, or 3.13-4 billion dollars;
- more than $8 billion will be allocated for dividends;
- share repurchases will increase from the original 9 up to 10 billion dollars.
Financial results of the company, billion dollars
| 2017 | 2018 | 2019 | 2020 | 2021 | 6m2022 | |
|---|---|---|---|---|---|---|
| Revenue | 65,058 | 66,832 | 67,684 | 70,950 | 76,118 | 41,291 |
| EBITDA | 16,586 | 16,197 | 16,656 | 18,719 | 20,721 | 11,586 |
| Net profit | 15,326 | 9,750 | 3,897 | 13,027 | 14,306 | 8,335 |
| net debt | 26,023 | 28,717 | 25,853 | 18,539 | 21,700 | 24,109 |
Comparison with competitors
| EV / EBITDA | P / E | net debt / EBITDA | |
|---|---|---|---|
| Procter & Gamble | 20,09 | 26,45 | 1,19 |
| Unilever | 13,65 | 17,72 | 2,44 |
| Colgate-Palmolive | 19,00 | 31,14 | 1,65 |
| Estee Lauder | 25,34 | 29,39 | 0,83 |
| Kimberly-Clark | 15,26 | 23,42 | 2,50 |
| Church & Dwight | 21,13 | 30,36 | 1,79 |
Arguments for
Dividend aristocrat. P&G is listed as an American company, who are more 25 years support growing annual dividend payments. Current PG result - 65 years. From 1956 to 2021, the company's annual dividend increased from 0,01 to 3,24 $, on average, payments increased by 9% annually.
Strong brand. Billions of people use the company's products every day due to the high quality of products and competent promotion of brands.. P&G is considered the largest advertiser in the world and spends about $10 billion a year on advertising..
The market is growing. According to Allied Market Research calculations, the global FMCG market will grow by over 50% by 2025, from $10.02 trillion in 2018 to $15.362 trillion, - which corresponds to the average annual growth rate in 5%.
Arguments against
Growth below the market. Even taking into account the constant growth of dividend payments, the dynamics of Procter stock prices & Gamble isn't perfect: since 2016, the company has almost doubled its industry index, but lost about 25% growth S&P 500.
Appreciation. Compared to industry competitors and current growth rates, multiples of P&G's are pretty high. Taking into account 3-4% sales growth, EV valuation of the company / EBITDA more 20, a P / E more 25 looks overpriced.
What's the bottom line?
Procter & Gamble is a great candidate for inclusion in a dollar dividend portfolio. Ideally, wait, when the company's valuation will be at the level of 2016-2018 at EV / EBITDA less 15 - about 117 $ per share. At the beginning of 2021, the company approached this level.
