Not every investor wants to outperform the stock market. Some people prefer to invest in assets that offer cash flow and more stability than the average investment. Investors tend to accumulate these types of stocks as they get closer to retirement. Social Security, dividend income, and other passive income streams can help people cover their living expenses if they plan ahead. Procter & Gamble (NYSE:PG) is worth monitoring if you want a stock that has been relatively stable during market corrections.
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Shares dropped by less than 10% in 2022, when many growth stocks and pandemic favorites crashed. However, the stock can still deliver respectable gains and is up by 60% over the past five years. I am neutral on this stock since this investment opportunity does not align with my goals as an investor. Still, it offers a lot of promise as a retirement stock.
Resilience During Economic Downturns
Procter & Gamble operates numerous brands that offer essential home care products. Many people use the corporation’s products for laundry, shaving, baby care, cleaning spills in the kitchen, and other essentials.
Procter & Gamble reports single-digit year-over-year revenue growth in most years, including 2022, when many corporations took a breather after the pandemic. Profits also tend to rise each year, with the second quarter of Fiscal 2024 being a recent exception.
Diluted net earnings per share decreased by 12% year-over-year to $1.40. According to the company, this decrease was “primarily due to the non-cash charge to impair the carrying value of the Gillette trade name intangible asset and higher non-core restructuring charges.” These expenses won’t show up each quarter, and P&G still reported a 16.17% net profit margin in Q2.
An Incredible Dividend History
Dividend investors value high yields and steady payments. Procter & Gamble stock currently offers a 2.33% yield, and the corporation’s 61.6% dividend payout ratio suggests that the firm has more room to hike its dividend.
Procter & Gamble raises its dividend each year and has done so for 67 consecutive years, but dividend growth has been modest recently. For instance, the corporation hiked its quarterly dividend in 2023 from $0.9133 to $0.9407 per share, a 3.0% year-over-year increase. Procter & Gamble is due to raise its dividend again in April.
While the corporation has raised its dividend for 67 consecutive years, its dividend track record is even better. The company has paid dividends for 133 consecutive years. Few dividend-paying stocks can compete with that history.
More Stability
Procter & Gamble trades at a 27x P/E ratio and regularly achieves a single-digit growth rate for its revenue and earnings. While valuation metrics are important, investors should also consider the stock’s 0.43 beta.
Beta measures a stock’s volatility compared to a benchmark. The S&P 500 (SPX) has a 1.00 beta and is the barometer for market performance. A lower beta means that a stock won’t have as many dramatic price swings. Less volatility doesn’t help in a bullish market when stocks are rallying, but it comes through during bearish markets when many stocks fall.
Investors who are more patient may want to wait for the valuation to drop a little bit. The company’s 27x P/E ratio looks extended, but it is a solid cash-flow-producing asset for long-term investors. The company’s dividend streak and sufficient payout ratio suggest that the stability will continue.
Is PG Stock a Buy, According to Analysts?
PG stock comes in as a Moderate Buy based on 16 analysts. Procter & Gamble has 11 Buy ratings and five Hold ratings. No analyst rated the stock as a Sell. The average PG stock price target suggests 4.5% upside potential. The highest price target of $180 per share implies the stock can gain an additional 11% from its current level. The lowest price target of $157 per share suggests 3% downside.
The Bottom Line on Procter & Gamble Stock
Investors who are looking for a better deal may want to wait for the valuation to drop a little. Nevertheless, Procter & Gamble stock is an enticing long-term investment opportunity for investors who are eying retirement and want to collect cash flow. Each dividend payout can help you cover living expenses or can go back into the stock as a reinvestment.
Procter & Gamble likely will not outperform the stock market, but it’s a boring stock that offers less stress. Some investors enjoy that level of stability and will trade outperforming the market for a reliable company. The company’s incredible dividend history and good financials suggest dividend hikes will continue for a long time.
P&G owns many brands that people use every day and has a strong competitive moat among other consumer staples. Procter & Gamble attracts customers for life who go on to recommend the company’s products to future generations.
