Dividend Stocks More Attractive Than P&G

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Mar 04, 2015

Fast moving consumer goods giant, Procter & Gamble (PG, Financial), is indeed one of the most respected dividend aristocrats in the market today because of its high rate of dividends and the consistency with which it has been declaring increases (124 years in a row). However, times are changing now and the stock market is getting too volatile. You have to look out for other companies that pay better dividends than P&G, enough to provide you cover against the instability of the market. If you thought P&G was the best ever dividend company ever, it is time to put your thinking caps on and consider the following companies. The companies discussed below are definitely better than Procter and Gamble for different reasons. Read on to know more:

Huge earnings make this better than P&G

To decide if a particular stock is a good dividend stock, you must not just look at the dividends it pays out. You must analyse various other factors like the dividend, rate of increases in the recent past, earnings growth for the last few years, capacity to increase dividends in the future at a good rate, etc. In the light of all these factors, the coffee giant, Starbucks (SBUX, Financial) is definitely a better stock than P&G. There are two important reasons for this conclusion: rate of increase in dividends (23% for Starbucks vs. 7% for P&G) and forecasts of earnings for the next five years (more than 18% for Starbucks vs. less than 7% for P&G). Analysts are of the opinion that Starbucks is the better dividend stock than P&G, purely because of the former’s phenomenal capacity to grow and increase cash flow circulation in the future. The following shows the annual dividend per share growth of Starbucks.

Growth in emerging markets is the key

When compared to overall global economic growth, another consumer giant beats P&G hands down in the dividend sector. It is Unilever (UN, Financial). Though in terms of diversification of products, brand-name and reputation and dividend yield (3% for P&G vs. 3.4% for Unilever) both the companies are more or less similar, one feature that sets the two apart is scope of growth in the emerging markets which include countries like China and Brazil. Unilever witnessed a huge increase in sales in these two countries for last year as close to 67% of its total sales. Growth in these emerging markets like Brazil, Russia, India and China was quite impressive for Unilever, when compared to the snail-paced growth of the company in big economies like America. On the contrary, markets like India, Middle East, Africa, Asia and other developing nations contributed to less than 33% of P&G’s total sales revenues. China and Japan are becoming big markets for most of the businesses and P&G’s slow growth here can cause problems for the company for its future growth prospects. This is why analysts pick Unilever over P&G, when it comes to the better dividend stock.Â

Conclusion

These stocks teach you to break away from the traditional mode of investing and make wise choices based on the condition of the stock market. It is indeed an undeniable fact that P&G has been increasing its dividends for more than a century now. However, there are companies with better growth prospects in the future than P&G. Hence as an investor, you must do all that you can to tap the potential of these stocks so that you get to increase your profits. Your sole objective should be to maximise your returns on investment. You should consider these two stocks as they have a great growth potential and have lots of scope to increase their revenues in future.