Linked here’s a detailed quantitative evaluation of Procter & Gamble (PG). Under are some highlights from the above linked evaluation:
Firm Description: The Procter & Gamble Firm is a number one shopper merchandise firm that markets family and private care merchandise in additional than 180 international locations.
Fair Value: In calculating truthful worth, I take into account the NPV MMA Differential Honest Worth together with these 4 calculations of truthful worth, see web page 2 of the linked PDF for an in depth description:
1. Avg. Excessive Yield Value
2. 20-12 months DCF Value
3. Avg. P/E Value
4. Graham Quantity
PG is buying and selling at a reduction to solely 3.) above. Since PG’s tangible e-book worth shouldn’t be significant, a Graham quantity cannot be calculated. When additionally contemplating the NPV MMA Differential, the inventory is buying and selling at a 87.9% premium to its calculated truthful worth of $78.53. PG didn’t earn any Stars on this part.
Dividend Analytical Data: On this part there are three doable Stars and three key metrics, see web page 2 of the linked PDF for an in depth description:
1. Free Money Circulation Payout
2. Debt To Whole Capital
3. Key Metrics
4. Dividend Progress Charge
5. Years of Div. Progress
6. Rolling 4-yr Div. > 15%
PG earned one Star on this part for two.) above. The inventory earned a Star because of its most up-to-date Debt to Whole Capital being lower than 45% The corporate has paid a money dividend to shareholders yearly since 1891 and has elevated its dividend funds for 66 consecutive years.
Dividend Income vs. MMA: Why would you assume the fairness danger and spend money on a dividend inventory should you might earn a greater return in a a lot much less dangerous cash market account (MMA) or Treasury bond? This part compares the incomes potential of this inventory with a high yield MMA. Two objects are thought-about on this part, see web page 2 of the linked PDF for an in depth description:
1. NPV MMA Diff.
2. Years to > MMA
The unfavourable NPV MMA Diff. signifies that on a NPV foundation the dividend earnings from an funding in PG can be lower than an identical quantity invested in MMA incomes a 20-year common fee of three.75%. If PG grows its dividend at 1.0% per 12 months, it can by no means equal a MMA yielding an estimated 20-year common fee of three.75%.
Friends: The corporate’s peer group contains: Clorox Company (CLX) with a 3.4% yield, Colgate-Palmolive Co. (CL) with a 2.4% yield, and Kimberly-Clark Company (KMB) with a 3.8% yield.
Conclusion:PG didn’t earn any Stars within the Honest Worth part, earned one Star within the Dividend Analytical Knowledge part and didn’t earn any Stars within the Dividend Revenue vs. MMA part for a complete of 1 Star. This quantitatively ranks PG as a 1-Star Very Weak inventory.
Utilizing my D4L-PreScreen.xls mannequin, I decided the share value would want to lower to $74.20 earlier than PG’s NPV MMA Differential elevated to the $500 minimal that I search for in a inventory with 66 years of consecutive dividend will increase. At that value the inventory would yield 5.0%.
Resetting the D4L-PreScreen.xls mannequin and fixing for the dividend development fee wanted to generate the goal $500 NPV MMA Differential, the calculated fee is 8.1%. This dividend development fee is greater than the 1.0% used on this evaluation, thus offering no margin of security. PG has a risk rating of 1.75 which classifies it as a Medium danger inventory.
The corporate’s free money stream payout at 62% (down from 69% within the earlier evaluate) is above my desired most of 60%. The low debt to complete capital of 43% (flat with earlier) is beneath my desired most. PG is buying and selling nicely above my calculated truthful worth of $78.53. For now, I’ll watch for a extra opportune time earlier than including to my place.
Disclaimer: Materials offered right here is for informational functions solely. The above quantitative inventory evaluation, together with the Star ranking, is mechanically calculated and is predicated on historic info. The evaluation assumes the inventory will carry out sooner or later because it has prior to now. That is typically by no means true. Earlier than shopping for or promoting any inventory you ought to do your personal analysis and attain your personal conclusion. See my Disclaimer for extra info.
Full Disclosure: On the time of this writing, I used to be lengthy PG (5.3% of my Dividend Progress Portfolio) and lengthy KMB.
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