Investors have been bracing for a slowdown in Procter & Gamble's (NYSE:PG) business as it goes up against a prior-year period that included maximum pantry-stocking from the start of the global COVID-19 pandemic. That deceleration has arrived.

P&G said on Tuesday that organic sales gains fell to 4% through late March, or about half the rate from the prior quarter. The consumer products giant is still seeing higher demand than during the pre-pandemic era, which is good news for shareholders. But returns over the next few quarters might be more influenced by P&G's sparkling financial metrics like profitability and cash flow.

Let's take a closer look.

A woman changing a baby's diaper

Image source: Getty Images.

Sales growth

As expected, organic sales gains settled down after jumping nearly 10% in each of the last two quarters. The 4% uptick P&G notched this quarter was its slowest in well over a year. Consumers are still stocking up on home care and cleaning essentials, but just not as eagerly as they have been in recent months.

Sales gains were supported by rising prices and a shift toward premium products like Tide Pods. P&G reported flat volumes in a jarring break from last quarter's 5% increase. Still, the company gained market share in key niches like fabric care, shaving care, and beauty. Competition intruded on some of its diaper brands, however.

Getting stronger

Management highlighted P&G's financial metrics, which all helped support an 8% jump in adjusted earnings per share. Cash flow has been especially strong, with operating cash landing at $14.3 billion over the last nine months compared to $12.6 billion a year earlier. "We delivered another quarter of solid top-line, bottom-line, and cash results," CEO David Taylor said in a press release, "in what continues to be a challenging operating environment."

P&G affirmed the sales outlook that executives raised back in late January, confirming that organic revenue should increase by between 5% and 6% in the year that ends in June. But their cash forecast is brightening. After converting over 100% of earnings to free cash flow this quarter, management now believes P&G will see a more-than-10% boost in operating cash in fiscal 2021.

Returning more cash

That success likely played a supporting role in management's decision to raise the dividend by 10% this year, compared to its 4% hike in 2020. Taylor and his team also lifted their stock-buyback target for a second straight time. They now plan to deliver $19 billion to investors this year, up $3 billion from their initial 2021 forecast.

Those surging returns should help cushion the blow from slower growth over the next few quarters as compared to the pantry-stocking behavior from a year ago. And they make the stock even more attractive for fans of steady income and market-thumping profitability.

Thanks to a relatively weak share price since mid-2020, dividend investors can get a yield that's significantly above 2% by buying P&G stock today. They'll likely be glad they did once the company works through the inevitable demand slowdown over the next year or so.

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