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P&G Is Dividend King and Top Kevin O'Leary Pick

P&G Is Dividend King and Top Kevin O'Leary Pick
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By Tuesday, 21 May 2019 04:46 PM Current | Bio | Archive

Kevin O’Leary is perhaps best known for his recurring appearance on the television show "Shark Tank." But he is also chairman of O’Shares Investments. The O’Shares FTSE U.S. Quality Dividend ETF (OUSA) owns a basket of stocks that have several characteristics in common.

The fund is widely comprised of large-cap stocks with durable competitive advantages and attractive dividend payouts. It should come as no surprise to see that consumer products conglomerate Procter & Gamble (PG) is one of the top 10 holdings of the OUSA fund, and is among Kevin O’Leary’s favorite dividend stocks.

Strong Brands, Dominant Market Share

P&G is a global consumer-product powerhouse. The company generates annual sales above $66 billion, spread across 10 different categories in which it holds leading market share. P&G sells its products in more than 180 countries around the world. Just a few of its core brands include Gillette, Tide, Pampers, Crest, and many more. Kevin O’Leary has professed a fondness for stocks with leading brands, and P&G fits the bill.

The company recently concluded a multi-year divestment program, which was designed to streamline operations and increase efficiency. The effort was marked by several divestments of product categories no longer deemed to be a major part of the company’s future growth. For example, it sold the Duracell battery brand to Berkshire Hathaway (BRK.B) for $4.7 billion, and also sold a collection of 43 beauty brands to Coty (COTY) for $12.5 billion. In all, P&G reduced its total brand count by nearly two-thirds.

These asset sales reduced the company’s revenue, but were beneficial to earnings as the company largely rid itself of low-margin brands with limited growth potential. The company used the proceeds to invest in its most attractive growth opportunities, and buy back stock to further grow earnings per share.

P&G also acquired Germany-based pharmaceutical giant Merck’s global consumer health business, for over $4 billion. The acquisition includes 10 core brands in vitamins, nutritional supplements, and other over-the-counter products. According to Merck, the global OTC market is expected to grow 5% annually through 2025.

These efforts are starting to show real results. Procter & Gamble reported strong financial results in its most recent quarter, including 5% organic sales growth. Adjusted operating margin expanded by 40 basis points for the quarter, driven by greater operational efficiencies. P&G also enjoyed favorable pricing and product mix last quarter. Currency-neutral core EPS increased 15% for the quarter.

For the full year, P&G expects 4% organic sales growth at the midpoint of guidance. It also expects 5% to 6% adjusted EPS growth for fiscal 2019. This growth will allow P&G to increase its dividend again next year.

P&G: Dividend Royalty

Kevin O’Leary is a big fan of high-quality dividend stocks, with strong yields and long histories of consistent dividend growth. P&G has all of these qualities. The stock currently offers a solid 2.8% dividend yield. And, P&G has increased its dividend for an amazing 63 years in a row. It is on the exclusive list of Dividend Kings, a small group of stocks with 50+ consecutive years of dividend increases.

P&G is not the most exciting business to invest in, but for risk-averse dividend growth investors, there are few stocks that beat it. With its durable competitive advantages and strong dividend, P&G is a top Kevin O’Leary dividend stocks.

Ben Reynolds is CEO of Sure Dividend. Sure Dividend helps individual investors build high quality dividend growth stock portfolios for the long run.

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P&G is not the most exciting business to invest in, but for risk-averse dividend growth investors, there are few stocks that beat it.
procter, gamble, dividend, king
Tuesday, 21 May 2019 04:46 PM
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