The Procter & Gamble Co. (NYSE: PG), the world’s top consumer products giant and a Dow Jones Industrial Average component, made important news on Monday by announcing that it was raising its dividend by 7%. That sounds like good news on the surface, but you might want to reconsider the implications here when considering dividend growth and defensive stocks versus real earnings and revenue growth.

24/7 Wall St. is reiterating its cautious stance for what this means to defensive stocks and dividend stocks in 2014 and beyond. In a world where growth is hard to find and where we are awash in unused capacity, the dividend cycle could be peaking. At a minimum it is still signaling a pause of dividend growth from key dividend stocks.

P&G’s board of directors declared an increase in the quarterly dividend from $0.6015 to $0.6436 per share on its common stock. This represents a 7% increase compared to the prior quarterly dividend.

We brought up a concern when rival Kimberly-Clark Corp. (NYSE: KMB) raised its dividend by almost 4%. Our warning at the time: “While we would love to suggest that a theme of ongoing dividend hikes will continue, the reality is that the ongoing dividend hikes from defensive consumer products stocks may be slowing down significantly in 2014.”

The good news: P&G’s dividend hike of 7% was the same as last year’s dividend hike. Maybe 7% is better than 4%, but P&G is the industry leader. Keep in mind that this dividend growth is faster than its operating earnings growth and its sales growth. P&G’s earnings growth is projected to be 4% in 2014 and 8% in 2015. Meanwhile, sales growth is projected to be only 1% in 2014 and 3% in 2015. The long and short, P&G’s dividend growth is growing faster than its operating earnings per share (non-GAAP) and revenues.

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P&G has been paying a dividend for 124 consecutive years since its incorporation in 1890, and this marks the 58th consecutive year that P&G has increased its dividend.

Even if this view sounds cautious, we are not exactly bashing this move. In fact, the dividend growth is better news than what we might have expected prior to today. Unfortunately, it still plays into a slowing dividend growth trend story rather than an expanding dividend growth story.

One last bit of good news is that the current market conditions favor defensive stocks. That being said, P&G shares are up 1.5% to $80.99 on a day that the DJIA and S&P 500 are both down by close 1%.

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