PROCTER & GAMBLE CO. $80 (New York symbol PG; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 2.7 billion; Market cap: $216.0 billion; Price-to-sales ratio: 3.0; Dividend yield: 3.4%; TSINetwork Rating: Above Average; www.pg.com) is one of the world’s largest makers of household and personal care goods. It began operating in the U.S. in 1837, and now sells its products in over 180 countries. Overseas markets account for 60% of its total sales.

The company has five main business lines: fabric and home care products such as Tide laundry detergent (29% of fiscal 2015 sales, 24% of earnings); baby and family care goods, including Pampers diapers (27%, 26%); beauty items such as Olay cosmetics (24%, 23%); grooming products, including Gillette razors (10%, 16%); and health care items such as Crest toothpaste (10%, 11%). Wal-Mart accounts for 14% of the company’s sales.

In response to rising competition from generic products, Procter is narrowing its focus from 166 different brands to 65. Of those remaining brands, 21 have annual sales of over $1 billion. Another 11 have annual sales of between $500 million and $1 billion.

The company’s overall sales rose from $82.6 billion in 2011 to $83.7 billion in 2012, and again to $84.2 billion in 2013 (fiscal years end June 30). However, sales fell to $83.1 billion in 2014 and $76.3 billion in 2015 as Procter began selling some of its businesses.

Earnings also fell 3.8%, from $11.8 billion in 2011 to $11.3 billion in 2012. Procter is an aggressive buyer of its shares. Due to fewer shares outstanding, pershare earnings only fell 2.0%, from $3.93 to $3.85.

Earnings then rebounded to $4.22 a share (or a total of $12.2 billion) in 2014, but dropped to $4.02 a share (or $11.5 billion) in 2015.

Three big deals lift Procter’s outlook

Those earnings exclude gains and losses stemming from Procter’s recent asset sales, such as the 2014 sale of its Iams pet food business for $2.9 billion.

In February 2016, Procter completed the sale of its Duracell battery business to Berkshire Hathaway (New York symbol BRK.A), the holding company controlled by billionaire investor Warren Buffett.

Under the deal, Berkshire exchanged all of its Procter common shares for Duracell. Procter also contributed $1.8 billion in cash to the battery maker. Structuring the deal this way let Berkshire avoid paying substantial capital gains taxes.

However, due to the decline in the value of Procter’s shares since it first agreed to the sale, the company recorded a $350-million charge on the sale.

Procter is also transferring 43 beauty product brands, including Wella, Clairol, Max Factor and CoverGirl, to Coty Inc. (New York symbol COTY).

To avoid triggering a big capital gains tax bill, Procter will split off these brands into a separate firm that will later merge with Coty. Procter will then give its shareholders the option of exchanging all or some of their shares for Coty stock. Following the deal, Procter investors would hold 52% of the combined firm.

The company expects to realize a gain of $5 billion to $7 billion when it completes the merger in the second half of 2016.

In addition to selling assets, Procter is closing plants and cutting jobs. In the past five years, it has reduced its global workforce by 13%.

New plan aims to double savings

These actions have lowered its annual expenses by $10 billion. Procter now aims to find an additional $10 billion in annual savings. For example, it is adjusting its plants to produce more than one product. That would let it ship multiple products on a single truck and lower its overall distribution costs. Procter has not yet said when it expects to achieve these new savings.

The company also cut its advertising spending to $8.3 billion (or 10.9% of sales) in 2015. That’s a 7.7% decline from $9.0 billion (or 11.2% of sales) in 2014. It also reflects Procter’s shift away from traditional ads to more effective in-store and online promotions.

In addition, Procter continues to develop successful new variations of its existing products. For example, it recently launched the Oral-B Genius electric toothbrush. This brush connects to a user’s smartphone, and an app monitors brushing time and tooth coverage. The app will also automatically adjust spinning speed if a user applies too much force.

The company’s strong balance sheet will continue to support its growth. As of March 31, 2016, its longterm debt was $19.1 billion, or just 9% of its market cap. It also held cash of $13.8 billion.

60 years of dividend increases

Procter recently increased its dividend by 1.0%; the new annual rate of $2.68 a share yields 3.4%. Due to its current restructuring, this increase was its smallest since 1977. However, it has paid dividends continuously since 1890 and has raised the annual rate each year for the past 60 years.

The company will probably earn $3.62 a share in fiscal 2016, and the stock trades at 22.1 times that estimate. Its earnings in 2017 should improve to $4.03 a share as it realizes more of the benefits of its restructuring. The stock trades at a more reasonable 19.9 times that forecast.

Procter & Gamble is a buy.