Last year, I picked household and personal products giant Procter & Gamble (PG 1.09%) as my top value stock to buy for 2026. P&G owns dozens of iconic brands across key everyday-use categories such as fabric care, home care, baby care, feminine and family care, healthcare, grooming, and beauty.
Investors have turned to P&G as a dividend-paying compounder and have been able to count on the company raising its dividend for 69 consecutive years -- significantly longer than the 50-year streak required to be a Dividend King.
With the investment thesis centered around generating reliable passive income, investors may be surprised to learn that P&G has rocketed 11.1% higher in 2026 compared to just a 1.3% gain in the S&P 500 (^GSPC 1.10%).
Here's what's driving the rally in P&G and why the stock remains a great buy now.
Image source: Procter & Gamble.
P&G continues to deliver mediocre results
My reasoning for calling P&G a no-brainer buy for 2026 centered around its relatively inexpensive valuation, portfolio of leading brands, elite supply chain, industry-leading operating margins, and ultra-reliable dividend. P&G was one of five Dow Jones Industrial Average components that fell by more than 10% last year, largely due to slowing growth and the consumer staples sector being out of favor as some investors piled into more exciting, higher-growth opportunities.
Heading into 2026, P&G's valuation was at multiyear lows. On Jan. 22, P&G announced second-quarter fiscal 2026 results, showing flat organic sales growth and lowering its forecast for fiscal 2026 diluted net earnings-per-share (EPS) growth to a new range of 1% to 6%. P&G continues to deliver gobs of free cash flow to support its dividend and stock buybacks, but the company is far from firing on all cylinders.
P&G tends to protect its high margins by raising prices. But consumers have been resisting price increases due to higher living costs. So P&G's new CEO is shifting the company's focus toward growing sales volume at least in the near term. P&G's margins may take a slight hit in the process, but it's the right move given that consumer budgets are strained.
NYSE: PG
Key Data Points
A sectorwide rally
With relatively weak quarterly results and guidance, you may be wondering why P&G is up so much in less than six weeks. The answer has less to do with what P&G is specifically doing and more to do with broader market dynamics.
Company-specific fundamentals drive long-term stock prices. The shorter the time horizon, the more emotion and sentiment can move the needle. And in this case, P&G is benefiting from a broader rally in the consumer staples sector, which is up 13% year to date.
Consistency and reliability may not look appealing when growth stocks are making rip-roaring gains. But those qualities stand out when investor risk appetite goes down, as is the case now. Instead of cheering artificial intelligence (AI) investments, investors are scrutinizing higher spending and questioning AI's long-term impact on previously praised industries, like software.
P&G remains a well-rounded buy
P&G could keep rallying if investors flock to value sectors like consumer staples. But for the stock to do well over the long term, P&G needs to reduce its reliance on price increases by driving product innovation and operational efficiency (which it is already doing through its "constructive disruption" strategy).
All told, P&G remains a well-rounded company with a solid 2.7% dividend yield. The stock isn't as cheap as it used to be, but it's still a good value at 23 times the midpoint of projected 2026 diluted net EPS.
