Will Procter & Gamble Raise Its Dividend in 2020?

Many stocks have discovered the benefits of delivering higher dividends to their shareholders year after year, but few have put together the track record that consumer products giant Procter & Gamble (PG +0.20%) has. For more than 60 years, P&G has been able to weather the ups and downs of the business cycle and still keep boosting its dividend payouts annually.

Procter & Gamble has recently faced some challenges to its ability to keep growing, as a combination of factors has created new headwinds that it's had to overcome. So far, P&G has successfully gotten through tough times, but some investors still worry that the future could have even bigger obstacles that could force the consumer products specialist to end its long streak. Below, we'll look more closely at Procter & Gamble and whether it can keep raising its dividend in 2020.

Dividend stats on Procter & Gamble

Data source: Yahoo! Finance. Last increase refers to ex-dividend date.

An amazing dividend history for P&G

Procter & Gamble has been making annual dividend increases longer than many investors have been alive, and the way in which it's delivered those higher dividends has been remarkably consistent. When you look at a chart of P&G's dividends during the late 1980s and 1990s, you'll see a gently upward-sloping line that shows the power of the consumer products company's brand building. As the company got more profitable, P&G shareholders got to share in the success through higher dividends.

In the 2000s and early 2010s, P&G started to grow its dividend even more quickly. Entry into emerging markets gave Procter & Gamble new avenues for faster growth, as a new consumer class wanted to enjoy their newfound wealth by buying prestigious items for their households. The company did a good job of promoting its many billion-dollar brands to a new set of customers, and for a long time, that helped support Procter & Gamble's latest growth spurt.

PG Dividend data by YCharts.

However, the pace of P&G's dividend growth slowed in the mid-2010s. A 3% rise in 2015 was about half as much as the company had delivered previously, and in 2016, P&G resorted to just a 1% boost as the consumer goods giant faced slowdowns in global markets and higher competition from other players in its space. Since then, Procter & Gamble has managed to get annual dividend growth back toward 3% to 4%, but that's still less than what many dividend investors feel comfortable seeing.

Will Procter & Gamble deliver a dividend hike in 2020?

Procter & Gamble had to deal with erosion in its profit margin figures, and it decided to make aggressive steps in order to turn itself around. That led to some painful reductions in earnings that have had the result of pushing payout ratios sky-high, creating concern about whether P&G's current dividend is sustainable.

Image source: Procter & Gamble.

Yet P&G has already seen some positive impacts from its turnaround efforts, and there's more to come. Procter & Gamble still has huge numbers of popular consumer brands, ranging from Tide detergent and Crest toothpaste to Pampers diapers. Most of P&G's brands rank best or second-best in their categories, and the consumer products giant has worked hard to sustain market share and continue to highlight the value of its brands. Recovering organic revenue growth is an early sign of success for P&G, and as profits return, most expect the company's payout ratio to fall back to more normal levels.

Investors can expect that Procter & Gamble will find a way to extend its dividend growth streak to 64 years in 2020, but the big question is how big the dividend increase will be. Most likely is another 3% to 4% increase that would take the payout up to roughly $0.77 per share. But if P&G does something less aggressive, it could signal new worries about whether the dividend stock is bouncing back as strongly as investors hope.