Procter & Gamble (NYSE:PG)’s Generosity Might Cost the Company


P&G (NYSE:PG) has been consistently paying out its shareholders in the form of dividends and repurchases for the past 124 years. It is considered among those companies that are generous to its shareholders. P&G (NYSE:PG) is also consistent in increasing its dividends for the past 58 years. However, analysts foresee problems in the future for P&G (NYSE:PG). The reason behind that is P&G (NYSE:PG)’s stock growth has been very slow lately because of the morose sales of some products in various categories.

Rivals are growing past P&G (NYSE:PG), when it comes to sales growth. P&G (NYSE:PG) is lagging far behind but the stock growth could definitely use a boost now. P&G (NYSE:PG) has always put its shareholders first; catering to them after every new business or every quarter earnings. The company has always paid its shareholders, even after losses. P&G (NYSE:PG)’s current dividend yield is 2.39 percent. Following the decades old precedent, P&G (NYSE:PG) increased its dividend by 7 percent in 2014.

In this year P&G (NYSE:PG) has returned 6.9 billion to its customers. Talk about being over-generous. But there is something we haven’t mentioned yet. P&G (NYSE:PG) is laced with a 35 billion debt which it has to pay back. Although P&G (NYSE:PG)’s revenue generating power is strong, it shouldn’t take any risk with its finances. Perhaps P&G (NYSE:PG) is afraid the shareholders would dump the stock, but for a conglomerate like P&G (NYSE:PG), shareholders shouldn’t be much of a problem.

The company’s payout ratio of 65 percent enables the company to handsomely give some returns to its shareholders and ‘some’ might be a generous word; P&G (NYSE:PG) pays out the investors in billions. In the market, in the eyes of the investors, this is quite commendable. But considering the cut throat business these days, one can’t be too generous especially when the finances are piling up way above your head. We’re not saying P&G (NYSE:PG) isn’t capable enough; it’s just that it seems too risky.

Investors, currently watching the stock performance in the market aren’t eager to dive in to buy P&G (NYSE:PG)’s stock the reason behind that is their slow growth. Nobody wants a stock that crawls. Investors are waiting for the stock to turn around and show some life. P&G (NYSE:PG)’s reputation is bested by none, but investors valuate the company on its current performance not on the magic it has been pulling since the past century.

P&G (NYSE:PG) is trustworthy as it has been around for a century; definitely longer than the most. P&G (NYSE:PG) should keep its stock performance in check, it shouldn’t let the slow growth turn into a decline. In fact Procter & Gamble (NYSE:PG) should work to inject the stock with some sort of a long term adrenaline rush because that is exactly what the investors on the street want. Procter & Gamble (NYSE:PG) wouldn’t want to go down in history being recalled a stock that got battered by the new age.