The Procter & Gamble Company (PG), Garmin Ltd. (GRMN): 2 Big Dividends to Avoid (and 1 to Embrace)

Consider this instead
For a more secure — but still generous — dividend, take a look at The Procter & Gamble Company (NYSE:PG) . The consumer giant’s sales are close to five-year highs, and yet its dividend yield, at 3%, is just a smidge below its five-year average. And as for safety, the company’s payout ratio is perched at a solid, but comfy, 50%. Here’s a look at how that ratio has been brought down lately as cash flow increased.

PG Free Cash Flow TTM data by YCharts.

P&G had to issue a couple of profit warnings in late 2011 after suffering market share losses to competitors like Unilever N.V. (ADR) (NYSE:UN). But management seems to have stopped the bleeding. P&G held or grew market share in brands that represented 50% of sales last quarter. That number was 45% in the quarter before, and just 30% in the quarter before that.

Buoyed by that success, P&G just boosted its sales and profit outlook for the year. The company also plans to invest heavily in share buybacks, aiming to purchase between $5 billion and $6 billion in shares this year.

Its dividend yield might not have the wow factor of Pitney Bowes’ 10% or Garmin Ltd. (NASDAQ:GRMN)’s 5%. But it is well protected by a diverse and growing base of earnings. And it is very likely to rise in the years ahead, too.

The article 2 Big Dividends to Avoid (and 1 to Embrace) originally appeared on Fool.com and is written by Demitrios Kalogeropoulos.

Fool contributor Demitrios Kalogeropoulos has no position in any stocks mentioned. The Motley Fool recommends The Procter & Gamble Company (NYSE:PG) and Unilever.

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