1 Reason Procter & Gamble Is a Must-Have

Yeah, I know, Procter & Gamble (NYSE: PG  ) is pretty boring. It's got none of the pizzazz of high-flying tech stocks, none of the ups and downs of biotechs, and no truly revolutionary product. But those are all reasons you should love the company, especially in this economic environment, teetering on the brink of deflation.

P&G has shown remarkable stability in its revenue growth over the last few years. Its products are diversified across goods that consumers use every day, making the company a stable cash machine. In fact, the company has been able to consistently grow its products, such that its segments comprise approximately the same percentage of total sales in 2009 as they did in 2006.

 

 

Procter's fabric and home-care division is its heavyweight, and in the most recently reported quarter, the consumer-goods giant managed to gain detergent share over rivals, even though it required some price cuts.

P&G's stability is evidenced by an average 5% revenue growth rate over the last three years, which produced 15.7% average annual increases in earnings. Along the way, P&G managed to boost its dividend by 12.6% per year on average. Those stable but rising numbers are a consequence of the company's everyday-use products and its relentless hunt for profitable markets.

While metrics from competitors such as Colgate-Palmolive (NYSE: CL  ) and Church & Dwight (NYSE: CHD  ) are somewhat better than what P&G mustered over the same period, those stocks are also more expensive on a price-to-earnings (P/E) basis, relative to Procter's 14.8 times earnings.

Company

3-Year Sales Growth

3-Year Earnings Growth

P/E (TTM)

Colgate-Palmolive

8.4%

16.2%

19.2

Church & Dwight

11.8%

18.9%

18.5

Source: Yahoo! Finance and CapitalIQ, a division of Standard & Poor's as of June 3, 2010.TTM = trailing 12 months.

The reliability of its consumer-goods franchise is one reason that Procter & Gamble is a portfolio must.

Jim Royal, Ph.D., owns shares in Procter & Gamble and Church & Dwight. Procter & Gamble is a Motley Fool Income Investor selection. The Fool owns shares of Procter & Gamble. Try any of our Foolish newsletters today, free for 30 days. The Fool has a disclosure policy.


Read/Post Comments (15) | Recommend This Article (88)

Comments from our Foolish Readers

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  • Report this Comment On June 03, 2010, at 5:45 PM, chukarlady wrote:

    No truly revolutionary product? I disagree. I found both Swiffer and Mr Clean Magic Eraser to be revolutionary for cleaning my house. I won P&G because everyone I know who has ever tried the Mr Clean Magic Eraser thinks it is magic! I know for a fact that people recommend the product to others.

  • Report this Comment On June 03, 2010, at 6:31 PM, notagamblerdc wrote:

    THREE YEARS is your time frame for "consistent performance?!?!?!?!?!?"

    No thanks.

  • Report this Comment On June 03, 2010, at 6:33 PM, footchester wrote:

    "1 Reason Procter & Gamble Is a Must-Have"

    Either I can't read or TMF has a habit of creating titles that are not backed up by the content of the article I've read the article twice and I have no idea what the "1 reason" is....

  • Report this Comment On June 03, 2010, at 8:35 PM, bybargains wrote:

    Pick enough different strategies and one of them is bound to be a winner. What happened to high growth rule breakers? I can't see this company as big as it is being able to double very many times in my lifetime.

  • Report this Comment On June 03, 2010, at 8:41 PM, ozzfan1317 wrote:

    Because you wont lose money holding it? I can agree with the safety of a company like this but I feel smaller companies with similar fundamentals offer better returns.

  • Report this Comment On June 03, 2010, at 9:03 PM, mikecart1 wrote:

    I'd be better off closing my eyes and throwing a dart at the closest bank CD.

  • Report this Comment On June 04, 2010, at 2:35 AM, wwt17 wrote:

    hmmmmm! snacks and pet care catagorized together. kind of makes you wonder, doesn't it?

  • Report this Comment On June 04, 2010, at 4:37 AM, danj585 wrote:

    I think some of the readers have missed the point of this stock pick. It offers downside protection in a volatile market. Taken together, the reasons in the first paragraph add up to a lack of sudden movement either up or down. That's the "one reason that makes it a must-have." It's a little more than "not losing money." The company has performed as well as, or better than the market over the last 10 years. Yes, there are some smaller companies that can perform as well, but there are smaller companies with similar fundamentals that don't perform as well for no apparent reason (e.g. ATVI currently). If the recommendation is taken in context, it is solid advice for investors who get nervous in shaky markets.

  • Report this Comment On June 04, 2010, at 10:41 AM, Big50Shooter wrote:

    I agree with Danj585;

    Owning P&G is like having 5 different/diversified companies in your portfolio... BUT, P&G is "solid" in all of those different sectors, whereas 5 different companies may produce 2-3 that are as solid...

    That was the point of this author I believe...

  • Report this Comment On June 04, 2010, at 4:12 PM, PeyDaFool wrote:

    CHD may have a higher P/E, but wouldn't you say it's worth it when it has an EPS of 20% over the past three years?

    I guess it's safe to say PG would be a better value play while CHD would be a better blend play.

  • Report this Comment On June 07, 2010, at 12:38 AM, fm2000 wrote:

    Pie Charts???

  • Report this Comment On June 09, 2010, at 3:33 PM, sagitarius84 wrote:

    PG is a consistent performer that has raised dividends for 53 consecutive years. This is called performance:

    http://su.pr/1UMUCn

    Enjoy!

  • Report this Comment On June 11, 2010, at 3:47 PM, sbukosky wrote:

    Big50shooter makes a good point. It is a stock with built in diversity. However, being new to investing, isn't this old news? After all, Cramer's been blaring about this stock forever and it's dividend. Morningstar rates it 5 star. It's not really a sleeper.

  • Report this Comment On June 12, 2010, at 4:54 PM, Vesta108 wrote:

    Footchester, they state that reason at the end of the article: "The reliability of its consumer-goods franchise is one reason that Procter & Gamble is a portfolio must."

  • Report this Comment On June 15, 2010, at 9:42 PM, philkek wrote:

    Good diversified comments here. Very foolish reading and I have learned something today from you smart fools. I don't own PG but I will do my homework in fundamentals and then decide as M.F. suggests with the 4 star rating. Good dividend too ? Thanks for the M.F. tip. Fool on for honest wealth.

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