In the investing world, dividends are all the rage these days. Investors large and small are clamoring for the reliability of quarterly dividend payments. There's good reason for this, especially considering what investors just went through only a few years ago. As the stock market crashed in 2008-2009, dividends provided valuable insulation against the bear market. And, now that the market has recovered, dividends only add to returns when stock prices rise.
One of the most well-known dividend stocks out there is consumer-staples giant Procter & Gamble (PG 0.68%), which has weathered a number of storms throughout its existence. P&G endured the Great Depression, wars, and several economic recessions, yet it survived and enriched its shareholders along the way.
P&G is a high-quality company thanks to its powerful brands, which is something it has in common with Clorox (CLX 1.24%). The brand portfolio along with strong financial management explain why P&G remains a fantastic dividend stock you can confidently buy today.
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World-class brands with staying power
Throughout the tumultuous events mentioned above, P&G continued to do what it does best. That is, the company consistently generated stable cash flow and returned a sizable portion of that cash back to shareholders with a solid dividend. P&G maintains a track record of paying and raising its dividend that is the envy of almost every other company.
The reason for such tremendous success year in and year out for such a long period of time is that P&G holds a stable of universally trusted and well-known brands. Just a few of these include Charmin, Bounty, Tide, Gillette, and Crest.
P&G has a total of 50 leadership brands that make up more than 90% of its sales and profits. Of those, 25 are called billion-dollar brands because they each rake in at least $1 billion in annual sales.
P&G is joined by other consumer-staples companies in this regard, such as Clorox. Clorox recently raised its dividend as it has done every year since 1977. This is possible because Clorox holds a number of strong brands too, including its namesake bleach as well as Kingsford charcoal and Hidden Valley salad dressing. In all, nearly 90% of Clorox's portfolio is comprised of brands that hold either the No.1 or No. 2 position in their respective categories.
Tremendous track record speaks for itself
Put simply, it's not a stretch to assume that one or more of P&G's products are currently held in nearly every household in America. Even better is that the company's products are purchased regardless of the prevailing economic environment. In good economies or bad, people need deodorant, paper towels, and razors. This is what allows P&G to keep dishing out its hefty dividends, year after year.
Consider that P&G raised its dividend earlier this year for the 58th consecutive year. It's paid a dividend for 124 consecutive years now. That means it's paid a cash dividend each and every year since its incorporation in 1890.
There's plenty of room for those payouts to keep flowing since it's extremely unlikely people will suddenly stop using laundry detergent, paper towels, or toothpaste. What provides P&G additional financial flexibility to keep raising its dividend is that it holds a sustainable dividend policy.
P&G earned $4.05 per share in its last fiscal year, and its current annualized dividend stands at $2.57 per share. That means the company distributed less than two-thirds of its profits, giving it plenty of room to keep bumping up its payout in future years.
Put simply, P&G sells products that will be used by millions of people every day, regardless of the shape of the broader economy. If you're looking for a stock that will help you build long-term wealth and sleep well at night, you should add P&G to your portfolio.
