Coca-Cola Is a Rock-Solid Dow Dividend Stock, but So Is This Dividend King That Plans to Pay $10 Billion in Dividends Over the Next Year.

P&G's Dividend and Capital Return Program - P&G raised its dividend by 7% in April, marking the 68th consecutive year of dividend increases, making it one of the longest-tenured Dividend Kings [2] - In fiscal 2024, P&G paid $9.3 billion in dividends and made $5 billion in share repurchases [3] - For fiscal 2025, P&G forecasts $10 billion in dividend payments and $6 billion to $7 billion in stock repurchases, suggesting another sizable dividend raise could be coming [3] - The pace of P&G's dividend raises is a significant vote of confidence for passive income investors, as it effectively sets a higher bar for future obligations [3] - A 7% raise on $9 billion in dividends equates to an additional $630 million in dividend expense, highlighting the challenge of maintaining the payout ratio [4] P&G's Financial Performance and Strategy - P&G's earnings growth has been disappointing in recent years, with earnings only slightly higher today than in fiscal 2017 [5] - Despite flat volume growth, P&G delivered 4% organic sales growth in fiscal 2024 and expects 3% to 5% organic sales growth in fiscal 2025, along with 5% to 7% core EPS growth [7] - P&G is making a strategic decision not to drastically cut prices at the expense of margins to drive sales growth, unlike companies like McDonald's or PepsiCo [8] - P&G successfully raised prices to combat inflation but experienced lackluster volumes, impacting growth [7] - The company expects the first half of fiscal 2025 to resemble fiscal 2024 but is confident it can reaccelerate volume growth and maintain or build upon margins [7] P&G's Historical Transformation and Margins - Between fiscal 2015 and 2017, P&G reduced its brand count by around 60% to focus on the best brands and improve margins, even at the expense of sales [6] - The restructuring was a resounding success, transforming P&G into a high-margin cash cow that prioritizes profitability over sales [6] - P&G's operating margin and sales growth have significantly improved in recent years, as illustrated by a 15-year chart [6][7] P&G's Valuation and Investment Appeal - P&G yields 2.4% and has a 28.3 price-to-earnings ratio, making it fairly expensive compared to other value-oriented choices in the consumer staples sector [9] - The company could sport close to a 4% yield if it didn't repurchase stock, but buybacks are a core element of its capital return program [9] - P&G has incredible pricing power, with management confident in retaining high margins and gradually boosting volumes without overhauling its strategy [9] - Despite being near an all-time high, P&G is considered a high-quality business worth paying a premium for, especially for investors prioritizing quality over price [10]