Procter & Gamble has rewarded investors for decades. It does not matter if the economy is at a peak or trough in the business cycle; Procter & Gamble will make money, and lots of it.
If Procter & Gamble is not a part of your portfolio, it is time to review this American success story in capitalism and consider whether there is still room for growth.
Procter & Gamble’s popular products for home use generate more than a billion dollars each year. You likely use at least one product made by Procter & Gamble in your daily life. Between diapers, tissues, feminine products and laundry detergent, Procter & Gamble has its fingers in all sorts of consumer products pies. More importantly, the company has a meaningful market share advantage in key categories such as diapers. As an example, the company’s Pampers brand has about a 44 percent share of the United Sates’s enormous diaper market. Our country’s diaper market is the largest in the world.
Procter & Gamble has more debt than some competitors like Kimberly-Clark. Though Procter & Gamble products are a mainstay in American homes, the company has nearly $22 billion worth of net debt. As a point of comparison, Kimberly-Clark, has a mere $7 billion in net debt. However, Procter & Gamble’s cash flow, free cash flow, revenue and departing profit are considerably larger than that of Kimberly-Clark and most other rivals.
Procter & Gamble will pay down its debt as we move forward. Investors should still expect a handsome dividend along with share repurchases in the quarters to come. Procter & Gamble really does have a significant advantage over most other players in its space based on its decades of dominance, yet there is a question as to whether this company is still poised to grow. As we all know, investors and Wall Street analysts are quick to frown on businesses with bleak growth prospects.
Investment analysts far and wide insist Procter & Gamble will face more competition in the years ahead. Private-label brands providing similar products offer low prices. Ever-increasing competition from online retailers will gradually take a toll on Procter & Gamble profits. Company executives are also concerned about increasing costs for commodities such as plastic and pulp.
All in all, Wall Street analysts expect Procter & Gamble’s earnings per share to increase about 6 percent each year. There will likely be sales growth in the single digits combined with stock buybacks in the years to come. Though this return rate does not dazzle, it is certainly better than that of most competitors.
Procter & Gamble has 21 total brands with more than a billion dollars in yearly sales across the globe. Though every business will eventually fail and Procter & Gamble has been selling computer products for quite a while, there is a consistent demand for these important goods. The masses currently use and likely will continue to use the likes of Pampers diapers, Pantene hair shampoo, Tide laundry detergent and Charmin toilet paper for decades to come. This means Procter & Gamble will continue to succeed even though it does not offer fancy tech gadgets.
If you do not have a stake in Procter & Gamble, you should add it to your portfolio. It appears as though the economy is headed toward a brief recession. Even if the economy is sluggish for months or longer, the money will still flow to the likes of Procter & Gamble.
The bottom line is the public will always need the products Procter & Gamble sells. Though there is the potential for online businesses to eat into Procter & Gamble’s margins in due time, investors can still make some money on this stock for at least the next couple years. Scoop up some shares of Procter & Gamble if it falls toward the low to mid $90s. Take a look at the company’s news headlines once or twice each year, and watch in admiration as your investment gradually appreciate in value. It can be said without a doubt that Procter & Gamble belongs in every single investor’s portfolio.