Name That Company

Founded in 1849 in Brooklyn, my first product was an anti-parasitic. By 1900, I mainly sold citric acid, camphor, cream of tartar, borax and iodine. I began making penicillin during World War II and was soon the world’s largest producer of it. My animal products division began in 1952. My portfolio, including Lipitor, Norvasc, Zithromax, Diflucan, Viracept, Zoloft, Aricept, Celebrex and Zyrtec, features many of the world’s top-selling medicines. Eight generate more than $1 billion in sales annually each. To help low-income Americans, I introduced my Share Card program in 2002. My annual sales top $30 billion, and I’m buying Pharmacia Corp. Who am I? (Answer: Pfizer)

Know the answer? Send it to us with Foolish Trivia on the top and you’ll be entered into a drawing for a nifty prize! The address is Motley Fool, Box 19529, Alexandria, Va. 22320-0529. Send questions for Ask the Fool, Dumbest (or Smartest) Investments (up to 100 words), and your Trivia entries to Fool@fool.com.

Gambling on Procter & Gamble

There’s an upside to the predictably slow and dreary growth in consumer nondurables: the predictably slow and dreary growth. Procter & Gamble (NYSE: PG), the conglomerate behind Tide, Crest, Pampers and Pringles, recently reported healthy second-quarter results, featuring earnings of $910 million on sales of $10.17 billion. Sales were up 6 percent over year-ago levels.

The company credits its 10 percent growth in unit volume to strength in its health and beauty products division. That was propped up by P&G’s recent acquisition of hair-coloring juggernaut Clairol.

Consumer nondurables, by definition, don’t last forever. The fact that these low-ticket items need to be perpetually repurchased has drawn investors to companies such as P&G in times of economic uncertainty. Sure, some folks may shave pennies by switching to generic brands, but conglomerates are, also by definition, well-diversified. That’s why P&G is often perceived as a safe haven, a defensive stock consistent through all economic climates.

Of course, being bid up in times of uncertainty doesn’t make defensive stocks inexpensive. Procter & Gamble is trading at roughly 25 times what it produced in core earnings this past year. That’s not cheap, given its slow growth rate. So perhaps wait for a drop in stock price to present a buying opportunity and in the meantime, consider learning more about P&G, starting at www.pg.com.

Parking-lot thoughts

Every time I shopped at Wal-Mart near my home or on a trip somewhere the parking lots were always full of cars. One day I dropped in very early and the Wal-Mart associates were having a pep rally, right in the store. When I asked where something was, they didn’t point, but instead walked me right to it. I bought 1,000 shares for $23,000. They’re now worth about $100,000. M.H., Twin Lakes, Wis.

The Fool Responds: Kudos! It’s smart to keep an eye peeled for businesses that seem to be firing on all cylinders. (Of course, you should always look under the hood, too, to make sure a firm’s finances are sound. For example, look for little or no debt, and rising revenues and earnings.)

It’s also smart to stick with companies and industries that you understand and whose progress you can easily follow. If you know nothing about biotechnology or semiconductors, perhaps avoid such investments. If you’re an avid shopper or, for example, a nurse, then consider examining retailers or health-care companies.

The dividend scoop

Do most companies base their dividend on a percentage of the value of their stock at the time the dividend is paid, or do they keep it set at the same amount for quite a while? Bill Sekulich, via e-mail

Dividend amounts tend to stay put for months or years. Healthy, growing companies will usually hike their dividend amounts periodically, to keep them attractive and also because paying dividends is one way to use excess cash to reward shareholders. For young or rapidly growing companies, though, it’s often best to plow any extra cash into fueling growth. This rewards shareholders by increasing the value of the company.

Is it best for a company’s projected price-to-earnings ratio (PPE) to be higher, lower, or about the same as the price-to-earnings ratio (P/E)? A.S., Crawfordville, Fla.

The P/E ratio is simply a company’s current stock price divided by its earnings per share (EPS) for the trailing 12 months. The projected P/E divides the stock price by next year’s projected EPS.

Investors like to see a PPE lower than a P/E because it means that earnings are expected to rise. Imagine Groundhog City (ticker: WDCHK), trading at $30 per share with EPS over the past year of $2. Its P/E would be 30 divided by 2, or 15. Now, assume that Groundhog City is expected to enjoy rapid earnings growth, raking in EPS of $3 next year. If so, then its PPE would be 30 divided by 3, or 10. Its PPE is lower than its P/E due to expected growth.

Remember, though, as we’ve learned only too well lately, that earnings can be manipulated, and estimates can be proven wrong. So don’t make decisions based on P/E or PPE alone.

Proxy voting

If you own shares of stock in individual companies (as opposed to through mutual funds), you’ve probably received proxy voting materials. Many people wonder whether there’s any point to voting, since most of us own negligible numbers of shares, compared to the millions of shares that exist for typical companies.

Proxy resolution information and voting materials are sent to every shareholder each year, via regular mail or electronically, informing them of major issues to be addressed at the firm’s annual shareholder meeting. Since institutional investors such as pension or mutual funds often own a majority of shares, our small votes can be moot. Still, sometimes they do make a difference, and it’s good to at least make your preference known. So read the materials and vote.

Here’s some guidance for you from the Shareholder Action Network, which serves as a clearinghouse of information on shareholder advocacy and socially responsible investing:

If you don’t understand the issue(s) at hand, you can seek guidance from several organizations. The Shareholder Action Network offers some resources, and online discussion boards (such as those at http://boards.fool.com) can help you gather information and opinions, too.

If you don’t vote or you leave your proxy items unmarked, your ballot will automatically be counted as in agreement with management. If you’re unsure of an issue, it’s better to abstain, which will withhold your vote. Abstentions, unlike blank or unsubmitted ballots, are not cast in management’s favor.

If you’re invested in a mutual fund or some other kind of investment that doesn’t permit you to vote directly, you can find out how the fund’s proxies will be voted. Fund companies often offer voting guidelines to help you understand what the fund’s positions are on various issues. If your mutual fund or institution doesn’t offer such information, give them a jingle and urge them to do so.

Click over to www.shareholderaction.org/proxy.cfm for a bunch of resources on proxy voting, guidelines and voting services. Further info is at www.sec.gov/answers/proxy.htm, www.proxyinformation.com and www.corpmon.com/Vote.htm.