A Recession-Proof Stock for Your Portfolio

The realities of a weak economy, rating downgrades, and diminishing Treasury resources have investors ready to hit the panic button. Before you throw in the cards, though, consider a company with a proven track record of withstanding recessions: Procter & Gamble (NYSE: PG  ) , a consumer favorite with a rich history of creating shareholder value.

Try this on for size
With more than 4.2 billion people consuming its products daily, P&G is indeed an industry leader. But rising commodity prices could increase production costs and drag down earnings. However, Procter & Gamble should be able to fight off rising costs by minimizing expenses and raising product prices.

The company's winning portfolio of products, which include 24 billion-dollar brands, give it an edge over competitors such as Unilever (NYSE: UL  ) and Clorox (NYSE: CLX  ) . Each of P&G's popular brands generates more than $1 billion in annual sales, and its operating margin of 19.16% is higher than both Unilever's and Clorox's.

Equally as impressive, 12 of the 24 brands are currently the No. 1 global market-share leader in their respective product categories. The company has a lot working in its favor overseas as well, with 15% of sales coming from Asia, 9% from Latin America, and 13% from Central and Eastern Europe. Developing markets in China and the Middle East offer opportunities for big gains.

Payback time
During great economic upheavals, investors seek healthy dividend payouts -- and P&G offers plenty to smile about with its 3.3% dividend yield. The company has delivered an annual 14.5% increase in earnings per share for more than a decade -- an attractive figure for value investors. 

One potential downside is that even though Procter & Gamble's strong earnings, label recognition, and growth potential in emerging markets put it ahead of competitors such as Unilever, shoppers buying generic store brands at the likes of Wal-Mart (NYSE: WMT  ) , and Costco (Nasdaq: COST  ) could threaten P&G's profitability in the long run.

Sustainable staying power
The company has outlasted more than one recession since its founding in 1837. I'm betting that as one of the world's 100 most sustainable companies, Procter & Gamble is in it for the long run -- as investors should be as well.  Find out what other dividend-rich stocks to buy in an uncertain market with this free report: 13 High-Yielding Stocks to Buy Today.

Fool contributor Tamara Rutter owns none of the stocks mentioned here. Connect with her on Twitter, where she goes by @TamaraRutter. The Motley Fool owns shares of Wal-Mart Stores, Costco Wholesale, and Clorox. Motley Fool newsletter serviceshave recommended buying shares of Unilever, Costco Wholesale, Procter & Gamble, Wal-Mart Stores, and Clorox and creating a diagonal call position in Wal-Mart Stores. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insightsmakes us better investors. The Motley Fool has a disclosure policy.


Read/Post Comments (1) | Recommend This Article (8)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On September 29, 2011, at 12:37 AM, Rokiez wrote:

    Yes! I am SO ready to trade oil! I've got a bottle of it in my cupboard!!! I hope I didn't burn profit when I used some of it to cook my omlet this morning.

Add your comment.

DocumentId: 1561254, ~/Articles/ArticleHandler.aspx, 4/19/2014 9:13:38 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement