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How Has Procter & Gamble's CEO Performed for Investors?

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Friday, 04 January 2019 03:40 PM Current | Bio | Archive

It goes without saying that the chief executive officer (CEO) is a highly influential person.

While there are certain events that are outside a CEO’s control, in general a new CEO can have a dramatic impact on whether a company is successful or not over time.

This is why it is important for investors to get to know their company’s CEO. Consumer products giant The Procter & Gamble Company (PG) underwent a dramatic transformation under current CEO David Taylor.

The company has made significant progress in its turnaround since Taylor was made CEO, and shareholders have benefited from his leadership.

P&G’s Major Restructuring

David Taylor was appointed President and CEO of Procter & Gamble on July 28, 2015. But his career with P&G goes back to 1980, and he has performed in a variety of roles during his nearly 40-year run with the company. Before assuming the role of President and CEO, Taylor was most recently Group President of Global Beauty, Grooming and Health Care.

Taylor was not given the CEO role at a great time for the company. At the time he was made CEO, P&G was struggling with sluggish sales, due to weak performance across multiple product categories. Put simply, P&G became a bloated, lumbering giant, with too many brands to effectively manage.

Taylor led P&G through its portfolio transformation, in which the company sold off slow-growth brands that were no longer deemed a major part of the future growth strategy. 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 transactions made P&G a more efficient company, by ridding itself of low-margin brands with weak growth prospects. In return, the company used the proceeds from its various asset sales to buy back stock to grow earnings, and also invest in new product categories.

To that end, P&G has made numerous acquisitions in new growth areas, such as the $4.2 billion acquisition of Germany-based pharmaceutical giant Merck’s global consumer health business. 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, which explains why P&G wants to invest more heavily in this area.

Turnaround Gaining Momentum

P&G is now focused on its strongest brands, that have the most growth potential. After years of stagnation, these efforts finally seem to be bearing fruit. P&G’s adjusted EPS have grown at 7.2% annually from 2016 through 2018, a welcome return to growth.

P&G stock has performed well since David Taylor took over as CEO. On July 28, 2015 the stock closed at $80.23 per share. Based on the recent price of $91.15, P&G stock has increased approximately 13.6% during Taylor’s tenure as CEO. Including reinvested dividends, P&G’s rate of return rises to 26.4%.

This is a fairly impressive rate of return, particularly considering the challenges the company has fought through over the past three-and-a-half years. To compare, the SPDR S&P 500 ETF (SPY) has returned 25.4% since July 28, 2015, including dividends. This indicates that P&G has outperformed expectations since Taylor became CEO.

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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BenReynolds
P&G is now focused on its strongest brands, that have the most growth potential. After years of stagnation, these efforts finally seem to be bearing fruit. P&G’s adjusted EPS have grown at 7.2% annually from 2016 through 2018, a welcome return to growth.
procter, gamble, ceo, investors
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Friday, 04 January 2019 03:40 PM
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