Wednesday, April 30, 2014

Does The Procter & Gamble Company Belong In Your Portfolio?

It's time to update my valuations on some of the dividend growth favorite consumer staples companies.  Consumer staples companies are great for dividend growth investors because people need to wash their clothes and clean their house whether the economy is booming or busting, which provides for more stable operations.  Today I'm going to look at the consumer staple giant Procter & Gamble (PG).  Shares of Procter & Gamble closed trading on Friday, April 25th at $81.41, giving a current yield of 3.16%.

Discounted Earnings:

Analysts followed by Yahoo!Finance expect Procter & Gamble to grow earnings 8.38% per year over the next five years, and I've assumed they can grow at 5.59% (2/3 of 8.38%) for the next three years and 3.50% in perpetuity.  Running these numbers through a discounted earnings analysis with a 9% discount rate and summing over 30 years yields a fair value price of $82.80.  This means the shares are trading at a 1.68% discount to the discounted earnings analysis.

Click here to read the rest of the analysis on Seeking Alpha.

I've updated my Stock Analysis page to include this update.

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