Founded in 1837, Procter & Gamble is the world’s largest consumer product manufacturer. The business operates with a lineup of approximately 25 leading brands that generate more than $1 billion in annual global sales! Some of these brands include:
PG’s current 10 year dividend growth rate is 10.07%!
Any investor, who’s main goal is to preserve capital, should seek, in all his or her investments, a significant difference between the current value of a business and the price in which the business can be bought. This insures protection in case of an unfavorable event and to maximize the investment return if the analysis is confirmed.
In the words of his disciple, Warren Buffett: “Never depend on a good sale. Get a purchase price so attractive that even a mediocre sale will produce good results.
Although given the title of “Dividend King” we must be vigilant in maintaining price discipline. We typically purchase operating companies at 8-10 times Cash Flow. However, a stock like this warrants special attention due to its size and dominance of their market. Chances are no other company will be able to purchase this behemoth of a company, therefore we will put a value on the business of 30 times Cash Flow. The goal is to purchase operating companies for at least half their value, with that said we will purchase this company up to 15 times Cash Flow.
Conclusion & Valuation
PG has consistent rising dividends, consistent debt, and strong cash flow. While I do not like the issuing of new shares P&G has proven itself in this market for decades. I will keep a watchful eye on the issue of new shares.
I am buying up to $54.45 and not a penny more!