We recently compiled a list of the 10 Dividend Stocks For Steady Income. In this article, we are going to take a look at where The Procter & Gamble Company (NYSE:PG) stands against the other dividend stocks.
Generating income has consistently been a primary goal for investors. To achieve this, they often opt for investments that provide steady and reliable returns over time. Dividend stocks are particularly popular in this regard, as they are well-regarded for offering regular income. Although using cash payouts from a stock portfolio is a popular approach among individuals nearing retirement, building an equity income portfolio is an option available to anyone. Over the years, dividends have significantly enhanced investors’ overall returns, making these stocks a compelling choice for income-focused portfolios. In certain periods, especially when equity returns fell below 10%, dividends have accounted for more than half of the total returns of major market indices, according to LSEG data.
Investors are increasingly emphasizing the quality of a company’s earnings. Examining factors such as dividends per share, dividend growth, and the stability of dividend payments can provide valuable insights into a company’s financial stability. Those who prioritize businesses with lower debt levels and higher profitability often target well-established, financially robust firms with greater flexibility. These high-quality companies typically demonstrate stronger resilience during market downturns and are more likely to sustain earnings growth across different market conditions.
Also read: 8 Best Dividend Leaders to Buy According to Wall Street Analysts
According to a report by BlackRock, historically, stocks that consistently grew or maintained their dividends have delivered better performance compared to those that either did not pay dividends or reduced their payouts. During market downturns, dividend-paying stocks often provide a buffer against the volatility of share prices. Companies that issue dividends typically strive to maintain these payments and are generally reluctant to reduce them unless absolutely unavoidable.
When investing in dividend stocks, investors often evaluate the dividend yield. Experts recommend focusing on yields within the 3% to 6% range, as higher yields may indicate potential yield traps. Brian Bollinger, president of Simply Safe Dividends, has also emphasized this point. Here are some comments from the analyst:
“I generally like to advocate for an approach of targeting great businesses that might pay closer to a 3% to 4% dividend yield.”
He further mentioned that these companies tend to gradually increase their payouts, which can enhance annual income streams and help counter the impact of inflation. Regarding companies with lower yields, he noted that they are often associated with more secure businesses and more reliable dividend payments. For example, the Dividend Aristocrat Index, which monitors companies with at least 25 years of consistent dividend growth, has an indicated yield of 2.28%. According to Bollinger, many of the firms in this index are well-established and financially stable. He suggested that creating a diversified portfolio of these companies can provide reassurance, as it builds a solid foundation for a growing stream of passive income, regardless of market fluctuations. He further said:
“When stock prices fall, it’s so easy to panic, but dividend investing can overcome that because you’re just trying to stay focused on your income stream. You don’t care so much about the markets’ short-term ups and downs anymore.”
As a result, investors often include dividend stocks in their portfolios.
Our Methodology:
For this list, we first filtered dividend stocks that have shown at least 10 consecutive years of dividend growth. From this group, we selected those with dividend yields above 1.5% as of December 20. Lastly, we chose 10 companies that have achieved a share price return of over 30% over the past five years. The stocks are ranked in ascending order of their dividend yields as of December 20. We also considered hedge fund sentiment around each stock using Insider Monkey’s data for Q3 2024.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here).
A happy couple viewing the products of this household and personal product company in a mass merchandiser store.
The Procter & Gamble Company (NYSE:PG)
Dividend Yield as of December 20: 2.40%
5-Year Share Price Return: 34.05%
The Procter & Gamble Company (NYSE:PG) is an Ohio-based multinational consumer goods company that specializes in a wide range of related products and services. The stock has delivered an outstanding performance this year, reaching a record high of over $179 per share in December. This achievement is primarily due to its strong operational execution. It has consistently delivered robust results, even amid inflationary pressures, by successfully implementing substantial price increases. Notably, in fiscal 2023, the company achieved organic sales growth every quarter. The stock is up by over 14% since the start of 2024 and has delivered a 34% return in the past five years.
In the first quarter of fiscal 2025, The Procter & Gamble Company (NYSE:PG) posted $21.7 billion in revenue, reflecting a 1% decline from the previous year. Operating cash flow for the quarter reached $4.3 billion, with adjusted free cash flow productivity at 82%, aligning with expectations. The company continued to deliver value to shareholders, returning $4.4 billion through dividends and share repurchases.
The Procter & Gamble Company (NYSE:PG) has issued an optimistic forecast for fiscal 2025, anticipating sales growth of 2% to 4% and a 10% to 12% increase in diluted net EPS compared to $6.02 in fiscal 2024. If it achieves the midpoint of this range, the company will set a new record with a diluted EPS of $6.68 for fiscal 2025.
The company boasts a strong history of shareholder returns, consistently paying dividends for 134 years. In addition, it has maintained 68 consecutive years of dividend growth, making it one of the best stocks with steady dividends. The company currently pays a quarterly dividend of $1.0065 per share and has a dividend yield of 2.40%, as of December 20.
The number of hedge funds tracked by Insider Monkey holding stakes in The Procter & Gamble Company (NYSE:PG) grew to 68 in Q3 2024, from 64 in the previous quarter. These stakes have a total value of more than $8.8 billion. Ken Fisher’s Fisher Asset Management was the company’s leading stakeholder in Q3.
Overall PG ranks 6th on our list of the best stocks with steady dividends. While we acknowledge the potential of PG as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than PG but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.