We recently compiled a list of the 10 Best Blue Chip Dividend Stocks To Buy. In this article, we are going to take a look at where The Procter & Gamble Company (NYSE:PG) stands against the other blue chip dividend stocks.
When it comes to investing in stocks, investors often keep a close eye on the company’s financial health. Why? Because it directly impacts the potential returns on their investments. This is especially crucial for income investors, as solid financial health ensures regular dividend payments and steady dividend growth. In short, a company’s strong financial footing means it’s more likely to keep the cash flowing and the dividends climbing. Blue chip companies, especially those with over $100 billion in market cap, take the lead in this area. These firms are well-established, financially stable, and top players in their industries.
The Dow Jones Industrial Average is commonly regarded as an index of blue chip stocks. This widely watched stock market index includes 30 of the largest and most established publicly traded companies in the US. The index surged by over 4.7% since the start of 2024 and in the past 12 months, it gained 16.4%.
When comparing the performance of the broader market and the Dow Jones, both of which track large-cap U.S. companies, historical data reveals a high correlation between the two indices over time. However, there have been notable instances where their performances diverged significantly. According to a report from S&P Dow Jones Indices, the market substantially outperformed the Dow Jones over one- and three-year periods. Conversely, over the 30-year period leading up to 2019, the Dow Jones slightly outperformed the broader market. This indicates that although these indices often move together, short-term performance can vary, and specific market conditions and economic factors can influence which index performs better during different periods. The Dow Jones underperformed the broader market in 2023 by a wide margin.
While analysts frequently compare the performance of these two indices, it is important to note that the Dow represents only a small segment of the economy. In contrast, the broader market includes nearly 17 times as many companies. According to estimates from S&P Dow Jones Indices, more than $11.2 trillion investments were benchmarked to the broader market at the end of 2019. This is a staggering 350 times greater than the $32 billion benchmarked to the Dow. A key reason for the broader market’s outperformance compared to the Dow last year is that the market places more emphasis on the tech giants, which were the primary drivers of the wider market’s gains throughout the year.
Returning to the importance of blue chip companies, investors favor these firms because their strong financial health allows them to grow their dividends consistently. Dividend growth has remained a strong preference of investors over the years, prompting companies to increase their dividend payouts steadily. In this article, we will take a look at some of the best blue-chip dividend stocks.
Our Methodology:
For this list, we began by examining the current members of the Dow 30 that boasted a minimum market capitalization of $100 billion as of July 7. From this initial group, we specifically focused on companies that consistently pay dividends to their shareholders and have yields of at least 2%, as of July 7. These stocks were then ranked in ascending order of the number of hedge funds having stakes in them at the end of Q1 2024, as per Insider Monkey’s database. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here).
A happy couple viewing the products of this household and personal product company in a mass merchandiser store.
The Procter & Gamble Company (NYSE:PG)
Number of Hedge Fund Holders: 69
An American multinational consumer goods company, The Procter & Gamble Company (NYSE:PG) ranks fourth on our list of the best dividend stocks. The company targets the high end of the market with its products, striving to justify this premium positioning through extensive research and development, ensuring its products provide real, tangible benefits. It spends nearly $2 billion on R&D annually, which is about 50% more than its nearest competitor and exceeds the combined R&D spending of most other competitors.
The Procter & Gamble Company (NYSE:PG) reported stable earnings in fiscal Q3 2024 as three of its divisions, including beauty, grooming, and fabric & home care showed YoY volume growth of 1%, 2%, and 1%, respectively. However, its healthcare and baby, feminine, and family care divisions experienced further volume declines. The company attributed these decreases to higher prices and a milder cold and flu season. Geography also impacted its sales, with China, The Procter & Gamble Company’s (NYSE:PG) second-largest market, still experiencing weak demand for products. In addition, the company’s CEO noted that in some regions, particularly the Middle East, retailers have reduced promotions due to ongoing geopolitical tensions.
The Procter & Gamble Company (NYSE:PG) offers a quarterly dividend of $1.0065 per share, having raised it by 7% in April this year. Through this increase, the company stretched its dividend growth streak to 68 years, which makes it one of the best blue chip dividend stocks on our list. Moreover, it has been paying regular dividends to shareholders for the past 134 years. The company’s cash position is strong, which shows that it can continue with its dividend policy by achieving its targets. In the most recent quarter, the company generated over $4 billion in operating cash flow and its adjusted free cash flow came in at $3.3 billion with a free cash flow productivity of 87%. The company maintains its forecast for adjusted free cash flow productivity at 90%. It also plans to pay over $9 billion in dividends in 2024. The stock has a dividend yield of 2.44%, as of July 7.
After more than two years, The Procter & Gamble Company (NYSE:PG) reached a new all-time high of $168 per share in June this year, surpassing its previous peak of around $165. This achievement is largely due to the company’s strong execution. The company has consistently performed well, particularly during inflationary periods when it successfully implemented substantial price increases. For instance, in fiscal 2023, the company saw organic sales growth in every quarter.
As per Insider Monkey’s database of Q1 2024, 69 hedge funds owned stakes in The Procter & Gamble Company (NYSE:PG), down slightly from 71 in the previous quarter. These stakes have a total value of over $7.2 billion.
Overall PG ranks 4th on our list of the best blue chip dividend stocks to buy. You can visit 10 Best Blue Chip Dividend Stocks To Buy to see the other blue chip dividend stocks that are on hedge funds’ radar. While we acknowledge the potential of PG as an investment, our conviction lies in the belief that some deeply undervalued dividend stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for a deeply undervalued dividend stock that is more promising than PG but that trades at less than 7 times its earnings and yields nearly 10%, check out our report about the dirt cheap dividend stock.
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Disclosure: None. This article is originally published at Insider Monkey.