Procter & Gamble Co (NYSE:PG) stock is up 11% year-to-date and it is one of the stock market’s most royal dividend aristocrats. In fact, PG stock has grown its dividend every year since 1957.
But activist investor Nelson Peltz, head of the $13 billion Trian Fund Management firm, who has a $3.2 billion position in Procter & Gamble stock, thinks management of the 180-year-old-firm needs some new blood on the board to get it moving for the 21st Century.
At the shareholders meeting earlier this week, there was a vote for new board members and Peltz was on the ballot.
The vote was so close, that it will take a while to confirm all the votes and declare a winner. Right now, PG’s board, who have been working with Peltz, have declared that they have won. Peltz isn’t making that concession, however.
He feels the vote is going to be won, one way or the other, by a mere 1%. Part of this has to do with the amount of shares Procter & Gamble holds and the amount of PG stock Peltz holds.
What’s Going on With PG Stock?
Peltz’s criticism of the company has been that management is moving too slowly and it isn’t taking the challenges of the modern market as seriously as it should. He says that buybacks in Procter & Gamble stock are artificially inflating earnings and that the company has been in trouble for a while, but the board and management refuse to believe there’s a serious issue to be addressed.
On the PG side, it has been navigating significant market and global issues for nearly two centuries and it has been paying a growing dividend since Peltz was 15 years old.
Buying back stock isn’t unique to the company. Every major company has been doing it since the 2008 crash. And given Peltz’s interest in getting involved in PG operations, it makes perfect sense that the company would acquire shares so it could fend off the move he finally made to get some control over the company.
According to Fortune, Procter & Gamble has four days after the vote to submit the results in an 8K filing, but if it can’t make a complete tally by then, it will take all the time that it needs to certify the vote.
That means this battle could last weeks or months.
This is not likely the first time outsiders have challenged the institutional wisdom of the PG management and board. And it’s not that the company hasn’t admitted that it needs to adapt. It continues to cut marginal brands and divisions and focus on its core products.
The point is, whether Peltz makes it on the board or not, has little to do with the fate of PG stock.
For now and for a long time to come, Procter & Gamble stock remains a rock-solid consumer staples dividend aristocrat.
Richard Band’s Profitable Investing advisory service helps retirement savers outperform the market without losing a minute of sleep along the way. His straightforward style and low-risk value approach has won seven Best Financial Advisory awards from the Newsletter and Electronic Publishers Foundation.
