Consumer products giant Procter and Gamble Company (PG) announced that its board of directors has approved a 7% hike to its regular quarterly dividend. This is the 56th consecutive year for which the company hiked its quarterly dividend.

P&G will now pay 56.2 cents per share of dividend to its shareholders compared to 52.5 cents paid earlier. The increased dividend will be paid on May 15, 2012, to shareholders of record as of April 27, 2012 for common stock and the Series A and Series B ESOP Convertible Class A Preferred Stock. The annual yield on the dividend is 3.4%.

The increased dividend reflects the company’s sound financial position. Signs of recovery in the economy have made share buybacks and dividend increases a common factor among companies, who are sitting on ample cash. Apart from enhancing shareholders’ return, such a strategy lifts the market value of the stock.

Procter & Gamble Co. recently reported modest results for the second quarter 2012, with net earnings from continuing operations sliding 2.7% year over year to $1.10 a share.

The company forecasts third-quarter 2012 net earnings from continuing operations and core earnings to be in the range of 91-97 cents per share, down 5% to up 1% versus a base period EPS of 96 cents.

For the second half of 2012, diluted net earnings per share from continuing operations and Core earnings per share are expected to increase 4%-9%.

Procter & Gamble exited the quarter with cash and cash equivalents of $2,768 million. and long-term debt increased year over year by $1,990 million.

Procter & Gamble has undertaken a cost reduction program under which the company announced slash over 5,700 non-manufacturing jobs during the current fiscal year. P&G anticipates that by trimming down 5,700 jobs, it will save up to $10 billion of cost, including $1 billion in marketing costs and $3 billion in overhead costs, by the end of the fiscal year ending in June 2016.

Cincinnati based Procter & Gamble Co. has stiff rivals like Colgate Company (CL) and Unilever (UL). Currently P&G holds a Zacks #3 Rank, implying a short-term Hold rating. On a long-term basis, we maintain a Neutral recommendation.

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