Today, we look at one of the most reliable of U.S. dividend stocks. Maker of some of the best-known brands in consumer products (Crest, Gillette, Tide), Procter & Gamble has raised its dividend for each of the past 59 years. Still, the mark of a successful company is its ability to make the necessary adjustments to keep on growing. Procter & Gamble has been selling off some of its less profitable brands over the past few years. In its most recent deal, a number of beauty product lines will be transferred to Coty Inc. in a carefully engineered spinoff and merger designed to avoid taxes. While these product sales cut into current earnings, they also give Procter a large infusion of cash for efficiency improvements, share buybacks and more dividends.

PROCTER & GAMBLE CO. (New York symbol PG; www.pg.com) makes products in five main categories: fabric and home care items, such as Tide laundry detergent (29% of sales, 24% of earnings); baby goods, including Pampers diapers (27%, 26%); beauty products, like Olay cosmetics (24%, 23%); grooming items, including Gillette razors (10%, 16%); and health care products, such as Crest toothpaste (10%, 11%). Wal-Mart supplies 14% of the company’s sales.

In the past few years, Procter has sold many of its less profitable brands, including its recent deal to transfer 43 beauty product lines, including Wella, Clairol, Max Factor and CoverGirl, to Coty Inc. (New York symbol COTY).

Instead of a typical sale, which would result in a large tax bill, the company 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.

Procter’s sales rose 1.9%, from $82.6 billion in 2011 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 fell 3.8%, from $11.8 billion in 2011 to $11.3 billion in 2012. Per-share earnings declined 2.0%, from $3.93 to $3.85, on fewer shares outstanding. Earnings then rebounded to $4.22 a share (or a total of $12.2 billion) in 2014 but fell to $4.02 a share (or $11.5 billion) in 2015.

Dividend stocks: Procter bought back $4.6 billion of its shares in 2015

Procter’s balance sheet remains strong. As of September 30, 2015, its long-term debt was $17.4 billion, or just 8% of its market cap. It also held cash of $12.6 billion.

The company is using the cash from its asset sales to boost its efficiency, including streamlining its supply networks and distribution channels. It feels these actions will cut $3.0 billion from its annual costs when it completes the plan by the end of fiscal 2017.

These savings will give Procter more cash for share buybacks (it repurchased $4.6 billion worth of its stock in fiscal 2015) and dividends. The company has raised its payout for 59 straight years. The current annual rate of $2.65 a share yields 3.4%.

International markets supply two-thirds of Procter’s sales, and the high U.S. dollar will probably cut its 2016 earnings to $3.76 a share. The stock trades at 20.5 times that forecast, which is still a reasonable multiple in light of its well-known brands and improving long-term profitability.

Recommendation in Wall Street Stock Forecaster: BUY  

For a recent report on another of our top buys among U.S. dividend stocks, read Biosimilar drugs part of Pfizer’s prescription for healthy competition.

For our advice on how to find the best dividend stocks, read How to tell if a stock pays a dividend and will keep paying it.