One of the most well-known facts about investing is that dividend paying stocks far outperform non-dividend paying stocks over the long-term. That being said, investors should not simply invest in a random stock with a questionable 12% yield and think that it will allow them to retire early; instead, they should be investing in high-quality companies with large, but safe yields of around 2.5%-4% that have long track records of raising their dividends. One stock that fits all of this criteria and then some is Procter & Gamble (NYSE:PG), so let's take a look at the company, its dividend, and some key financials, then decide whether or not the stock represents a buying opportunity today.

Source: Procter & Gamble

A glance at the well-oiled machine
Procter & Gamble, or P&G, is the company behind some of the world's most popular consumer product brands, including Charmin, Crest, Dawn, Duracell, Gain, Gillette, Pampers, Pringles, and Tide. The company has active operations in about 70 countries and supplies products to more than 180 countries, serving approximately 4.8 billion people every year.

The dividend: past & present
P&G has paid dividends every year since its incorporation in 1890, resulting in an incredible 124 years of payments. In addition, the company has raised its dividend for 58 consecutive years, with the most recent increase coming on April 7. Here's a chart of P&G's annual dividend payments per share since 2008, including the projected payment in 2014:

Source: Procter & Gamble

As the information above shows, P&G has increased its dividend by an average of 10.6% since 2008 and currently yields about 3.2%. The primary financial factor that has allowed the company to consistently increase its payout year after year is its ample free cash flow generation. What is free cash flow?

Free cash flow: the enabler of dividends
Free cash flow can be simply explained as the money a company has left over at the end of a period after paying its employees, bills, interest on debt, taxes, and making necessary investments in property, plants, and equipment. This free cash can be used to grow the business, or if it is not needed elsewhere, the company can return it to shareholders, which is where dividends are born.

Let it flow, let it flow
Procter & Gamble is one of the most efficient companies when it comes to generating free cash flow; take a look at this chart, which shows the amount of free cash flow generated by the company over the last five years:

Source: Procter & Gamble

P&G's consistent free cash flow generation, paired with its cash on hand to begin each quarter and year, allows it to sustain and raise its dividend as well as repurchase billions of dollars worth of its shares; by repurchasing shares, the company reduces the amount of shares available in the market, which increases its earnings per share and makes the remaining shares more valuable. Here's a chart of the total cash returned to shareholders during the same six-year time frame discussed before:

What is P&G on pace to accomplish in 2014?
So far in fiscal 2014, P&G has generated $6.85 billion in free cash flow and used this to pay approximately $5.1 billion in dividends and repurchase approximately $5.5 billion of its common stock; here's how this breaks down by quarter:

Dividends Paid $1.7 billion $1.7 billion $1.7 billion
Share Repurchases $2.5 billion $1.5 billion $1.5 billion
Total Cash Returned $4.2 billion $3.2 billion $3.2 billion

Source: Procter & Gamble

This puts the company on pace to generate over $9 billion in free cash flow and return over $14 billion to shareholders during the year. Needless to say, this would be another very impressive year for the company and it would once again greatly reward its shareholders.

Going forward, I believe P&G can easily maintain the pace of over $9 billion in free cash flow and over $10 billion returned to shareholders, due to its world-renowned product mix and its constant innovation; however, before we decide if we should become shareholders ourselves, let's see where the stock stands today...

Is P&G the stock to own right now?

Source: Procter & Gamble

Today, P&G's stock sits over 7% below its 52-week high of $85.82 reached back in November, yields about 3.2%, and trades at 21.1 times trailing-twelve-months earnings; these are enticing from an investment standpoint, but the icing on the cake is the fact that P&G trades at just 17.5 times fiscal 2015's estimated earnings of $4.52.

If P&G were to trade at the same multiple of 21.1 in 2015 as it does today, this would propel the stock over $95, representing more than a 20% upside from today's price; I believe this is a very reasonable expectation for a company of this size and strength, not to mention the additional returns from reinvested dividends and the continued earnings growth over the next several years. All in all, P&G appears to be one of the best investment opportunities in the market today.

The Foolish bottom line
P&G is one of the most powerful consumer products companies in the world and its stock represents one of the best investment opportunities in the market today. Foolish investors should strongly consider initiating long-term positions right now to allow price appreciation and reinvested dividends provide significant returns over the next several years.