In what’s become something of a habit, Procter & Gamble (PG -4.75%) surprised on the upside in its second quarter of fiscal 2025. Not only that, the huge, sprawling, and very well-established company managed to grow key fundamentals, a feat that isn’t easy to accomplish at this size and scope.
What I find particularly admirable about this quarter isn’t necessarily what the company did to power that growth. It’s about what it didn’t do. Allow me to explain.
The lever that wasn’t pulled
Procter & Gamble managed to boost its net sales by 2% year over year during the quarter to just under $21.9 billion. On a non-GAAP (adjusted) basis, what the company calls its “core” earnings landed at $1.88 per share, again a 2% increase.
In pure percentage terms, 2% isn’t a “wow” figure. But for the immense Procter & Gamble, this means a net sales improvement of roughly $500 million across that one-year span. Even some of the most famous and widely admired businesses don’t earn half a billion dollars over a year, let alone add it to their already considerable top line in such a brief stretch of time.
The really admirable aspect to this is that Procter & Gamble engineered this growth without raising prices, its time-honored tactic to help juice top-line increases. This was the first time in six years the company kept prices level. So that $500 million rise was entirely due to higher volume.
Another feat is that, of the five main product categories, none saw a decline in volume. Beauty broke even, while fabric/home care, grooming, healthcare and, especially, baby, feminine and family care all posted gains. Happily, the latter category is the second largest of the quintet in terms of total net sales. Witness:
| Product Category | Net Sales (bn) | YOY Growth |
|---|---|---|
| Fabric and home care | $7,575 | 2% |
| Baby, feminine and family care | $5,298 | 4% |
| Beauty | $3,848 | n/a |
| Healthcare | $3,249 | 2% |
| Grooming | $1,752 | 1% |
Source: Procter & Gamble. YOY = year over year.
Those sorts of numbers are in line with the better quarters Procter & Gamble has posted in the recent past. They also topped professional expectations — on average, analysts tracking the stock were modeling less than $21.7 billion in net sales for the period.
Income investing royalty
Better-than-average net sales growth is something of a bonus for many Procter & Gamble investors. That’s because it’s widely, and justifiably, considered one of the sturdier income stocks on the scene.
It’s one of the S&P 500 index’s precious few Dividend Kings, that exclusive club of companies that have effected dividend raises at least once every year for a minimum of 50 years running. On top of that, Procter & Gamble has one of the longest streaks. At 68 straight years, that’s almost the all-time record, and it beats that of luminaries such as Coca-Cola, Target, and Walmart.
It’s a relatively generous payout, too, with a 2.5% yield that is more than double the percentage rate of the S&P 500’s 1.2% average.
Procter & Gamble has indicated it will increase its spend on shareholder remuneration. So investors can fully expect yet another dividend raise in the looming future (management tends to announce such hikes in April) in addition to hefty share repurchases.
It might not be the most exciting company around. Nevertheless, it’s managing to do better than many thought. It’s product lineup is wide and popular, and clearly management knows how to get more of those goods into consumer hands. I like how Procter & Gamble’s fundamentals are developing, and as ever, I’m a fan of that dividend. This is one of the most solid stocks an investor can own.
Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Target and Walmart. The Motley Fool has a disclosure policy.
