1 Fantastic Dividend Stock Yielding Nearly 3% to Buy Like There’s No Tomorrow in 2024
Dividend stocks are the cornerstone of a well-rounded investment portfolio, offering not just stable sales and earnings growth, but also the added perk of immediate income. By opting to reinvest these dividend payouts, investors harness the power of compounding, steadily building a larger investment stake over the years.
Maximizing this compounding effect involves looking for opportunities where a stock either boasts an attractively high yield or is available at a discount—or, ideally, both. This combination can significantly enhance long-term investment returns. One such opportunity currently presents itself with Procter & Gamble (NYSE: PG), making it a compelling buy for forward-looking investors.
In the face of challenging market conditions over the last few quarters, Procter & Gamble has demonstrated remarkable resilience. Despite a cautious spending environment, the consumer staples heavyweight continued to report revenue growth through 2023. The company achieved a 4% increase in organic sales in the most recent quarter, maintaining a growth trajectory of about 5% for fiscal year 2024. “We delivered strong results…enabling us to raise our core EPS growth guidance and maintain our top-line outlook,” CEO Jon Moeller proudly stated.
However, investors should keep an eye on sales volumes in the upcoming quarterly reports, as growth in this area has been tepid. A 1% decline in volume last quarter indicates that the company’s organic sales growth was solely driven by price increases. While such a strategy is not uncommon in the industry, achieving a more balanced mix of price and volume growth would be ideal for Procter & Gamble in the near future.
The true strength of dividends lies in their funding, which comes from a company’s cash flow and earnings—areas where Procter & Gamble excels. Operating cash flow soared to $10 billion over the past six months, a significant improvement from $7.6 billion a year earlier. This robust cash flow translates almost directly into earnings for Procter & Gamble, with net profit surging 16% last quarter, thereby expanding profit margins even as sales growth moderated. These financial successes enable the company to consistently return nearly $15 billion to shareholders annually through dividends and stock buybacks.
Despite underperforming the broader market in 2023, Procter & Gamble now represents a relatively economical choice for income-focused investors, trading at 4.6 times sales—down from recent highs between 5 and 5.5 times sales. While still at a premium compared to competitors like Kimberly Clark, which trades at 2 times sales, Procter & Gamble’s superior market share and earnings potential justify the higher price.
Incorporating a dividend yield of nearly 3% completes the equation for promising long-term returns. Opting for automatic reinvestment of those quarterly dividends allows you to incrementally increase your shareholding, thereby enhancing both capital growth and income over time. This strategy positions Procter & Gamble as a potential cornerstone of any diversified investment portfolio.
Given its proven resilience, growth prospects, and effective shareholder returns, Procter & Gamble emerges as a top dividend stock to buy and hold. It offers a blend of stability and growth that can appeal to a wide range of investors, making it worth considerable attention in 2024 and beyond.
