3 reasons to buy Procter & Gamble stock like there’s no tomorrow

Does your portfolio need more exposure to the relatively safe consumer staples sector? What about dividend income?Maybe you’re even considering taking a stake Procter (NYSE:PG) But I couldn’t bring myself to take the risk. This is certainly understandable. The stock isn’t cheap right now, and there aren’t a ton of growth opportunities for this already large company.

Just be careful not to talk yourself out of a great stock pick. There are many good reasons to choose P&G at this time. Here are my top three.

1. Own multiple category-leading products

Being a market share leader doesn’t necessarily mean the company’s stock is worth buying. Category leaders, on the other hand, usually have good reasons for being category leaders. The reason is, the product is a quality product and the company behind it knows exactly how to market it.

To do this, know that Procter & Gamble has leading brands in several different product categories consumer goodsIt makes many products you probably know, from Pampers diapers, Tide laundry detergent, Gillette razors to Crest toothpaste, just to name a few. About a dozen of its brands are U.S. market share leaders at any given time by more than 10 percent. small.

For example, its Bounty paper towels’ annual revenue is five times that of its nearest competitor. So does Gillette. P&G even dominates the crowded laundry detergent market, outselling its next-largest domestic competitor four to one with Tide products. Connect the dots: P&G is clearly doing something right.

As noted earlier, being ahead of multiple markets doesn’t necessarily make the stocks of the companies behind those leading products worth buying. In fact, it’s hard to topple a category leader if for no other reason than buying these companies’ products eventually become unpopular. – Habits of thought.

In Procter & Gamble’s case, R&D on brand “advantages” worth about $2 billion a year further fuels this habit, allowing the company to avoid getting into a price war in which no rival actually wins. This is a strong advantage and an important part of the company.Why P&G was able to weather the storm The recent wave of inflationary pressures.

2. Size matters

Greater size can become a disadvantage if a company does not deliberately manage the complexity and bureaucracy that comes with size. But P&G handles its importance well. The company regularly conducts necessary evaluations and reorganizations, shedding the unplanned bloat that easily develops when scaling. A big company is not looking.

However, the company still retains all the advantages that come with increased scale. Taking its marketing budget as an example, P&G is often the world’s largest single advertiser in terms of total advertising spending, spending approximately $8 billion annually on television, print, digital media and in-store promotions.Smaller competitors, e.g. Clorox and Unilever Just can’t keep up.

The competitive advantages that come with scale don’t stop there.With an expanded lineup of market-leading products, P&G also enjoys significant leverage over its retail partners, such as Walmart and KrogerThis often results in prominent placement of their products in stores and joint advertising spend, to name just a few benefits.

However, P&G has more to cover, and its competitors will find it more challenging. For example, the company has made significant investments in artificial intelligence, which is being used in a variety of ways, such as more efficient manufacturing and even more effective advertising.

3. P&G has an excellent dividend pedigree

Last but not least, interested investors can safely expect that Procter & Gamble will continue its current dividend supremacy. Procter & Gamble has not only paid regular dividends for decades. As of this year, the company has raised its annual dividend for 67 consecutive years. As one of the companies with the longest dividend growth history in the market, P&G will do its best to maintain uninterrupted growth in annual dividend payments.

Perhaps more important than P&G’s dividend record is the company’s ability to pay these dividends without diminishing its ability to invest in its own growth. For fiscal 2023, which ended last June, P&G reported a profit of $5.90 and a dividend of just under $3.68 per share. A 62% dividend payout ratio leaves enough earnings to give P&G some financial flexibility and even fund share buybacks.

Now newcomers will buy P&G stock, and the dividend yields as high as 2.3%. In the long term, S&P 500 IndexThe current dividend yield is 1.35%.

Weigh the pros and cons

There are downsides to owning shares of P&G. Its lack of growth is a big problem. Expected revenue growth of 3.4% this year and an equally modest forecast of 3.9% next year are actually the long-term norm here; you can certainly find prospects for even faster growth. The stock isn’t cheap either, priced at 25 times this year’s expected earnings per share.

Just keep the big picture in mind. Investors can expect and should be willing to pay a premium for reliable, high-quality options and strong dividend payers. Procter & Gamble might be just what your portfolio needs right now.

Should you invest $1,000 in Procter & Gamble now?

Before buying Procter & Gamble stock, consider the following:

this Motley Fool Stock Advisor The analytics team has just identified what they believe is 10 Best Stocks Investors can buy now… and Procter & Gamble isn’t one of them. The 10 stocks selected could generate huge returns in the coming years.

stock advisor Provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. stock advisor The service has more than tripled the S&P 500’s returns since 2002*.

View 10 stocks

*Stock Advisor returns as of March 25, 2024

James Brumley The Motley Fool has no position in any of the stocks mentioned. The Motley Fool owns and recommends Target. The Motley Fool recommends Kroger and Unilever Plc. Motley Fool has disclosure policy.

3 reasons to buy Procter & Gamble stock like there’s no tomorrow Originally published by The Motley Fool

Source link

Related Articles

Leave a Reply

Your email address will not be published. Required fields are marked *

Back to top button