It’s always fun to chase a big return in a sector that potentially offers mammoth returns. But it’s equally important to populate your portfolio with tried-and-true winners that you can count on for steady growth. That’s where Procter & Gamble (NYSE:PG) comes in. And why you may want to keep Procter & Gamble stock on your watchlist.
The Cincinnati-based consumer goods company is as steady as they come. Founded more than 180 years ago, Procter & Gamble makes and sells health care, grooming, beauty and home products.
Popular brands include Tide laundry detergent, Dawn dishwashing liquid, Bounty paper towels and Charmin toilet paper.
Granted, those types of products don’t offer the triple-digit returns that you may get from biotech companies that are working on vaccines for the novel coronavirus, but PG stock is giving investors consistent returns and growth, as well as a solid dividend.
And as Election Day nears and volatility is expected to roil the stock markets, Procter & Gamble stock is also one of my top picks as a safe stock to shield your portfolio against a downturn.
Let’s take a closer look at this dividend stalwart.
Procter & Gamble Stock at a Glance
So far in 2020, PG stock is up a solid 14%, and it’s up more than 45% from its March low after the markets collapsed. With Covid-19 lockdowns in place this spring, the company’s paper towel, toilet paper and cleaning supplies were in high demand.
Unfortunately, coronavirus cases in much of the U.S. are trending higher, and White House Chief of Staff Mark Meadows finally acknowledged the obvious: “We’re not going to control the pandemic,” he said. “… Because it’s a contagious virus just like the flu.”
That means we can expect people to continue to buy, or even hoard, Procter & Gamble’s paper products throughout the winter as we collectively hunker down while waiting for a vaccine.
Those sales fueled the company’s fiscal-first-quarter earnings, which were announced Oct. 20. Procter & Gamble posted revenue of $19.32 billion, beating analysts’ expectations of $18.38 billion. Earnings per share came in at $1.63, which also beat the $1.42 per share that analysts had expected.
Home care sales, which include home cleaning products such as the company’s Mr. Clean brand, increased 30% in the quarter. Fabric and home care sales, which include Tide and Comet cleaning items, increased 14%.
The company raised its 2021 fiscal year guidance, saying it expects sales growth of 3% to 4%, which is up from its previous guidance of 1% to 3% growth. Revenue guidance also increased from previous expectations of 2% to 4% growth to a new estimate of 4% to 5% growth.
Earnings per share saw a revised estimate of 5% to 8% growth, which is up from the company’s previous estimate of 3% to 7% growth. And the company announced it would increase its planned stock buyback. It intends to spend $7 billion to $9 billion to buy back stock, which is up from its previous intention to buy back $6 billion to $8 billion in stock.
Jon Moeller, the company’s chief operating officer and chief financial officer, offered a rosy assessment in a conference call with analysts:
“We feel we continue to have the right priorities to deal with the immediate challenges the company is facing, ensuring employee health and safety, maximizing product availability and helping society overcome the challenges of the crisis. We’re stepping forward, not back. We’re doubling down to serve consumers and our communities. We’re investing in the superiority of our brands and the capabilities of our organization, always with our eyes fixed on long-term balanced growth and value creation.”
Don’t Forget the Dividend
I’m always interested in companies that offer solid growth while also paying investors a generous dividend. PG stock has a history of doing both consistently.
In fact, Procter & Gamble has been paying a dividend for more than 130 years. That’s extraordinary. Currently, PG stock’s dividend sits at 2.2%.
I like dividends because often, they reduce the volatility in a stock. That’s important for investors because you want the core of your portfolio to be names that offer stable, dependable growth rather than companies that could lose their value as quickly as their gains.
The Bottom Line
Procter & Gamble is a rock-solid choice to anchor a portfolio. It offers consistent returns, and it is poised for continued solid growth in 2021. Its products remain in high demand as we enter winter during the coronavirus pandemic.
PG stock has a “B” grade and a buy recommendation in my Portfolio Grader right now.
— Louis Navellier and the InvestorPlace Research Staff
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Source: Investor Place