Wednesday, October 16, 2013

Dividend Compass Cup Match 7 - Procter & Gamble versus Unilever

In the last match of the Dividend Compass Cup, Walmart eked out a win over McCormick Spice. In this match we are sticking with the store shelves theme - Procter & Gamble (PG) versus Unilever (UL).

The Dividend Compass Cup rules are straightforward, we run the two quality, wide moat companies through the Dividend Compass to analyze which is the more interesting investing candidate. Todd Wenning's Dividend Compass scores them 1-5.

Procter & Gamble has continuously paid its dividend since 1890, its raised its dividend 57 years running.

Procter & Gamble may have gone through some churn at the executive level with the short reign of Bob McDonald, however a glance at the Dividend Compass shows that while slowing its not really in dire straits.

PG Metrics

Consistently good margins and interest coverage are enough to overcome low/no growth, and meh FCF  cover.

PG Score:

The overall mark for five year average is a strong 4.17, however the last three years are less impressive.

Turning to Unilever, as with Royal Dutch Shell, Unilever is listed in the UK and in the Netherlands. We'll focus on the UK listing (UL) since the UK market has a dividend tax treaty with the US.

Unilever brings very strong REturn on Equity and its balance sheet generally looks better than P&G. However like P&G, Unilever struggles with earnings and FCF Cover. On top of that Unilever is all over the map on dividend growth, not as consistent as you might hope.

Unilever Metrics

The combined effort for Unilever shows that despite strong slaes growth, its not trickling down to the parts that most matter for income investors

Unilever score

This match goes to Procter & Gamble, the firm has had a slowing couple of year, but even its 3.75 recent low score is good enough to beat Unilever's five year average.

P&G cannot celebrate for long since they now have to go up against the mighty Microsoft

The next match is the final round one match, we move to healthcare - Baxter versus Novo Nordisk.

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