Jim Cramer’s 5 Best Dividend Stocks

This article presents an overview of Jim Cramer’s 5 Best Dividend Stocks. For a detailed overview of such stocks, read our article, Jim Cramer’s 11 Best Dividend Stocks.

5. Procter & Gamble Co (NYSE:PG)

Number of Hedge Fund Investors: 75

Jim Cramer has long been a fan of Procter & Gamble Co (NYSE:PG). His charitable trust owns a stake in Procter & Gamble Co (NYSE:PG). Jim Cramer thinks Procter & Gamble Co (NYSE:PG) is a best of breed stock with a strong balance sheet and steady dividends. In December, Jim Cramer said Procter & Gamble Co (NYSE:PG) might have some issues in the short-term but the stock is a good buy for the long term. Cramer said Procter & Gamble Co (NYSE:PG) has a “good yield” and it’s a dividend aristocrat. Cramer said he likes Procter & Gamble Co (NYSE:PG) because “it is for sale and it is the biggest beneficiary of the big-cap stocks.”

Hayden Capital made the following comment about The Procter & Gamble Company (NYSE:PG) in its third 2023 investor letter:

“It’s not just emerging markets either, where one could argue a “scarcity premium” given fewer quality public companies. Even in the US, Coca-Cola trades at ~30x P/E despite having the same earnings as 10 years ago. The Procter & Gamble Company (NYSE:PG) is likewise at ~27x P/E, with earnings only ~12% higher than a decade ago (or a ~1% annual growth rate). This equates to a mere 3.3% – 3.7% earnings yield.

Both of these companies actually have lower revenues than 10 – 15 years ago too, indicating that their profit growth is mostly from margin expansion. This can only last for so long before there’s no more excess expenses left to cut.

I find it ironic that all these companies trade as “bond-equivalents” in the minds of investors – even commanding lower yields than US treasuries, the safest security in the world. But it’s clear that their businesses are not nearly as safe. Proctor & Gamble is facing disruption from direct-to-consumer brands that offer their products for a fraction of the price.

But these companies are ~35% more expensive than US Treasuries, despite the heightened risk. On a risk-adjusted basis, one could argue the implied premium is even higher.

Perhaps the explanation is simply the price volatility difference between these stocks and treasuries over the last two years. For example, 10-year Treasury bonds are down ~-20% since the beginning of 2022. By comparison, KO and PG are remarkably down only -4 – 6% over that time frame.”