Why Procter & Gamble is a Rock Solid Dividend Stock

Some people choose to invest in stocks because of their potential for appreciation. In contrast, other people choose to invest in stocks because of the dividends that are paid out on a regular basis, thus creating a revenue stream for those who are holding on to them. Naturally, the stocks that are good for one purpose tend to be less good for the other, not least because the earnings used for expansion can't be used for dividends and vice versa. As such, people who are interested in dividend stocks should be looking up stocks that are suitable for that particular purpose, with an excellent example being Procter & Gamble.

Have You Considered Procter & Gamble?

Procter & Gamble is one of those companies that most people in the United States will have heard about at some point in time. However, just because they have heard about the company, it doesn't necessarily mean that they have a clear idea of what the company does to make its money. Something that is particularly true because Procter & Gamble has been making some serious changes to its operations in recent times.

In short, Procter & Gamble is named for William Procter and James Gamble, who were an English candlemaker and an Irish soapmaker who had emigrated to the United States in the 19th century. The two met one another when they married a pair of sisters named Olivia and Elizabeth Norris, but it was their father-in-law Alexander Norris who convinced them to become business partners. Over time, the resulting business called Procter & Gamble became bigger and bigger with more and more brands. Some of these brands were created in-house. In contrast, others were purchased from their founders to strengthen the company's ever-more impressive portfolio. Unsurprisingly, the sheer extent of the Procter & Gamble business empire provided it with considerable influence, with an excellent example being how its sponsorship of radio shows played an important part in seeing soap operas named soap operas.

With that said, businesses can become too enthusiastic about expanding themselves, which is what Procter & Gamble's leadership felt had happened to the company. As a result, they made the choice to get rid of around 100 brands in August of 2014, which would have enabled them to focus on the 65 brands or so that were responsible for producing the overwhelming majority of its profits. Due to this, Procter & Gamble now consists of just six business units that are organized around product categories, which are nonetheless united by their shared theme of care. This is the streamlined company that exists in the present time.

Why Is Procter & Gamble a Good Choice For a Dividend Stock?

In recent times, the Procter & Gamble leadership has been eyeing growth for their company, which in turn, means the potential for appreciation in their stock price. This isn't impossible. After all, the company has plenty of options for securing further growth for its already mature brands and products, with examples ranging from launching new products in the same sectors to launching side products in similar but not quite the same sectors. However, chances are good that dividend investors won't be focusing on that point when they are looking over Procter & Gamble, seeing as how there is something much more interesting for their particular investing priorities.

Simply put, Procter & Gamble is one of the 50+ companies that can be called a dividend aristocrat. For a company to be able to receive the prestigious title, it has to have seen its dividends rise in year after year for at least 25 years. However, what is particularly remarkable is that Procter & Gamble isn't just a dividend aristocrat but also a dividend king, meaning that it has managed the feat for at least 50 years and counting.

Said feat is an incredible show of skill. There are some companies that are counted among the dividend aristocrats because the sales of their products and services are locked in for long periods of time, meaning that they are much less risky than most of their counterparts in other sectors. However, Procter & Gamble has no such protection, meaning that it has managed to continue raising its dividends for decades and decades while selling a wide range of personal products, household products, and more besides. Something that serves as unspoken but nonetheless very persuasive proof of its excellence. Of course, the performance of the past isn't a 100 percent guarantee of the performance of the future. However, the former is certainly suggestive of the latter under normal circumstances.

As for why dividend investors should be jumping on this kind of thing, the answer is that it is a matter of stability. Generally speaking, people want dividends because they want to have a stream of revenues coming in for them, meaning that they tend to prioritize making sure that said stream will be there for them rather maximizing it at the expense of its reliability. Since Procter & Gamble can provide what is pretty much the most convincing proof of the reliability of its dividends that can exist, this makes it a natural choice for dividend investors.

Further Considerations

However, interested individuals should remember the basic rule of making investments. In short, even if they hear that something is suitable for someone in their particular position, they should still check it out on their own. In part, this is because what they hear isn't necessarily a perfect description of the true situation, meaning that it doesn't hurt to double-check. However, it should also be noted that different investors can have very different needs and preferences, meaning that interested individuals aren't necessarily identical to a general representation of their approximate type of investor. Ultimately, when it comes to investing, interested individuals will want to be both careful and considerate when making their investments, particularly if they are after sure dividends.