FASCINATING SLIDE: The Power of Compounding - P&G's 54 Consecutive Years of Dividend Increases

Per our December post, 1-800-Flowers.com (FLWS): Is "Moat" Shallow, Shrinking, or Nonexistent?, we still owe readers follow-up commentary on the company's Fannie May Confections business. We hope to share something soon. Please stay tuned.

About one week ago, we shared a "fascinating slide" from Compania Cervecerias Unidas S.A. (CCU). Here, we share a striking slide related to our stocks versus bonds stance. The fact remains that numerous large, high quality, dividend-paying companies are offered at reasonable multiples of earnings. Moreover, rather than a static coupon payment from a bond, many companies consistently increase dividends to equity shareholders year in and year out.

Take Procter & Gamble (PG) for instance. Per the below slide from P&G's December Analyst Meeting, the company compounded dividends at an average growth rate of 9.5% for 54 consecutive fiscal years:


Not too shabby and evidence of a very durable franchise. SO, in addition to potential capital appreciation derived from a growing stream of earnings (assume constant P/E multiple but higher "P" and "E" over time; "E" grows through levers such as new product launches, market expansion, and pricing power), investors benefit handsomely from a growing stream of dividend income.

While we've no position in P&G, the company's incredible dividend track record neatly illustrates why we prefer equities to bonds for those investors with a long-term time horizon.

Happy investing,

Jeffrey Walkenhorst
CommonStock$ense

Disclosure: long FLWS, CCU.

© 2011 Jeffrey Walkenhorst
Please see important Risk Factors & Disclaimer