Lots of stocks are compelling picks. A few of them are even powerhouses. Only a handful of equities, however, merit the title of being one of the smartest investments you'll ever make.
If you're looking for such a pillar for your portfolio, here's a suggestion: Buy Procter & Gamble (PG 0.23%) and hold on to it forever. It's one of those names with staying power you just don't have to worry about like others.
3 ways Procter & Gamble is just too big to stop
You may know the company's name, but do you know how many familiar brand names are part of the P&G family? This is the organization behind products like Pampers diapers, Tide detergent, Gillette razors, and Charmin toilet paper, just to name a few.
There's a reason you know these names, and it's not just because most are market share leaders that have been around forever. Rather, they're market share leaders that have been around forever because Procter & Gamble has mastered the art of promoting them.
More than that, Procter & Gamble can afford to market its products more than any of its competitors. Depending on the year, P&G is the world's single-biggest advertiser. Ad Age estimates P&G spent $11.1 billion on advertising last year, slipping into second place right behind an increasingly aggressive Amazon. P&G's most direct rival, Clorox, spends less than $1 billion per year on advertising.
Greater scale clearly offers P&G an edge. But that's not the top reason investors should consider oversized exposure to the stock. There are two other equally important factors working in its favor. One of these other reasons is the nature of its businesses.
Think about it. Consumers might postpone the purchase of a new automobile when money is tight. They may even skip a vacation. Nobody's going to stop using toilet paper or detergent. That's why they're called consumer staples -- people buy these goods over and over again because they have to. P&G will always enjoy demand for its products, even if it's begrudging demand. The company's long-term revenue and profit growth demonstrate it.
PG Revenue (TTM) data by YCharts
Coupons and clever marketing help in this regard, of course, although it's worth noting that the company makes a point of ensuring its products are also the best possible choice in their respective categories.
The third dynamic working in P&G stock's favor is how well entrenched its brand names are. Sure, some consumers are always willing to test-drive a new product. It would be naive to believe, for instance, that the debut of Dollar Shave Club or Harry's didn't at least make a small dent in Gillette's business. Kimberly Clark's Huggies diapers compete with P&G's Pampers. Clorox-branded cleaning products compete with P&G's Microban disinfesting solutions.
What's largely being overlooked, however, is how many busy consumers still opt for the brand they've always used (or even their parents used) simply because that's the comfortable, no-thought choice. Market research outfit BrandSpark International's 2023 Most Trusted Brands report cites several P&G brands like Tide, Gillette, Crest, Dawn dish soap, and Bounce dryer sheets as the nation's most trusted. In fact, 23 different P&G brands topped BrandSpark's list, far more than for any other company.
The kicker: Procter & Gamble is not only the market leader of several key consumer goods categories, but is also often the name behind the more affordable second option. As an example, while its Tide is the dominant name in laundry detergent, P&G also owns Era, Gain, and Cheer. In addition to Dawn dishwashing liquid, P&G is the name behind Cascade.
P&G stock makes good sense for investors of nearly any ilk
Like any other stock pick, this one's got its downsides. In this case, you're limiting your growth prospects in exchange for reliable, recurring revenue and earnings. Analysts are calling for a little less than 2% sales growth this year followed by less than 5% sales growth next year. That's in line with long-term norms. Profit growth rates are about the same.
P&G's stock, however, has at least outpaced the company's sales growth for years. Indeed, shares have roughly doubled in value over the course of the past five years, and are up more than 200% for the past decade. Credit the company's generous stock-buyback programs fueled by its consistent -- and consistently growing -- cash flow. Last quarter's 2.47 billion outstanding shares is a multi-year low, and there's little reason to think the company won't continue taking shares out of circulation anytime soon.
PG Average Diluted Shares Outstanding (Quarterly) data by YCharts
In the meantime, P&G's dividend has grown from $0.60 per share 10 years ago to $0.72 five years back, to $0.94 per share now, with some degree of payment increase being put in place in each of the past 67 years. There's little reason to think that streak is going to end anytime soon.
Bottom line? It's anything but sexy, but Procter & Gamble is a solid pick with surprisingly more pizzazz than most investors expect. It would be a brilliant addition to many investors' portfolios.
