Procter & Gamble (NYSE:PG) has been flying high in 2020 as COVID-19 led consumers to empty stores of the company's cleaning products and household essentials.

However, investors should recognize that the bump in demand is only temporary. The changes made by P&G to its organization and product mixes will likely have a longer-term impact on the stock. As the company returns to a post-COVID-19 growth path, investors will want to know if they can make a tidy profit over the next five years. Let's find out.

The state of Procter & Gamble

Where Procter & Gamble stock will trade in five years depends heavily on maintaining its competitive moat. That edge has hinged largely on name recognition, product positioning, and the brand loyalty that has developed over the company's 180-year history.

Still, products such as laundry detergent and paper towels that drive this consumer staples stock are necessary but not particularly innovative. As e-commerce becomes increasingly common, investors may be worried that upstart personal products companies can undercut Procter & Gamble by selling online. Dollar Shave Club was a prominent example of this dynamic before Unilever acquired the company in 2016.

Businesswoman wearing a mask as she disinfects her PC.

Image source: Getty Images.

However, the company has moved in a positive direction under current CEO David S. Taylor, who took the helm in 2015. Under his leadership, Procter & Gamble became that upstart competitor in many respects. To this end, it established P&G Ventures specifically for the purpose of opening new markets using direct-to-consumer strategies.

The company also acquired products such as Native deodorant and Billie razors that have sold successfully online. Furthermore, it revamped its marketing to target specific demographics and communicate online, turning data science to the company's advantage.

P&G adopted major organizational changes as well, turning to product categories that "leverage P&G's strengths." Thus, it has sold off several businesses and acquired new ones such as the $4.2 billion deal for Merck's consumer health division.

The company also increased external hiring and changed its organizational structure in 2019. Taylor adopted six industry-based sector business units to bring about what he calls a "more empowered, agile, and accountable organization." These moves have helped to keep Procter & Gamble relevant as consumer buying habits change.

What the current financials suggest

Although P&G remains a work-in-progress, its strategic moves have boosted its valuation. Procter & Gamble stock trades at a forward price-to-earnings (P/E) ratio of approximately 26, above its five-year average of 22. Its 2020 fiscal year ended on July 31, and thanks to the COVID-19 crisis, core earnings increased by 13% for the year.

But even Taylor's changes are not going to lead to sustained double-digit growth. Procter & Gamble expects an increase of between 3% and 7% on the bottom line for the upcoming year.

Yet even with slower earnings growth, Procter & Gamble will continue to win some investors over with its dividend. The payout remains strong, as the company celebrated 130 years of dividend payments and an impressive 64 years of annual increases as of 2020, making it a Dividend King. It now pays shareholders just over $3.16 per share annually. This brings the yield to 2.2% as of this writing, well above the 1.7% average yield for the S&P 500.

Additionally, Procter & Gamble should have no trouble sustaining its payout growth streak for the next five years. Last year, the company generated $14.9 billion in adjusted free cash flow, easily covering the $7.8 billion of dividends paid.

Procter & Gamble in five years

Even at its scale, the business remains a work-in-progress. The changes to Procter & Gamble's products and the organization itself show that the company has not resisted change. And management is now focused on product categories where it can become the No. 1 or No. 2 brand. Investors can expect Procter & Gamble stock to march slowly and steadily higher. However, barring another pandemic-inspired run on its products, I do not expect the company to generate more than low single-digit top-line growth.

The other concern for investors is the valuation -- shares are already setting new multi-year highs. But Procter & Gamble stock can still be a consistent performer and maintain its Dividend King status.