Why P&G Is a Great Stock to Hold Into Retirement

If you're nearing retirement, Procter & Gamble (PG) might be a good addition to your stock portfolio. Its personal care focus, its history of creating new products to meet consumers' needs, its near 50% dividend payout and its strong cash flow give it a stable outlook and make it a compelling choice for those looking to buy and hold quality stocks.

P&G is the market leader in a highly competitive personal and home care industry that includes players like Unilever (UL), Colgate-Palmolive (CL) and Kimberly-Clark (KMB). Trefis puts a $75.25 price estimate on P&G stock, roughly a 15% premium over its current market price.

Stable Outlook

New technologies can become obsolete, and sales of luxuries goods often swing widely with economic cycles. Necessities, though, are here to stay: Consumer demand for items like detergent, shampoo, razors and skin creams often holds up even when households forfeit discretionary spending.

P&G's well-diversified business derives less than 40% of its sales from North America, while 35% come from developing markets in Asia and Latin America. This helps cushion business or economic shocks from any particular region, which lends it added stability.

All of this has been reflected in P&G's stock price, which remained relatively stable during the economic downturn from 2007 through 2008. In the past year, P&G's stock has increased steadily by about 10% to current levels of around $65.

Innovation Provides Growth

P&G frequently ranks among the most innovative and admired companies in the U.S. according to number studies such as CNN Money's annual ranking.

With R&D spending at around $2 billion in the fiscal year that ended June 2010, P&G products have been around for over 170 years backed by innovation, which shall help it maintain and even grow its market share in the future as well.

P&G bests its peers with a 14% cash-conversion ratio, which captures the company's operational efficiencies. This is mostly driven by economies of scale, and shows how efficiently the company converts sales to cash. This in turn helps P&G maintain a healthy dividend payout ratio, which is around 48% of the cash it generates. We wrote a note discussing this -- Procter & Gamble's Cash Flow Bests Peers, Justifies 20% Upside.

For retirees, the dividend constitutes a regular income stream, and P&G boasts 55 consecutive years of increasing dividends at an average annual growth rate of over 9%. This kind of cash flow and earnings profile is why it can count Warren Buffett as one of its shareholders: Berkshire Hathaway owns more than 3% of P&G.

You can see a detailed analysis of our $75.25 Trefis price estimate of Procter& Gamble's stock here.

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Trefis is an online investment research platform targeted towards individual and professional investors. Trefis also includes a community of users that can create and share their models and analysis on trefis.com.




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9 Comments

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Not Again

I just got a $829.99 iPad2 for $98.37 and my girlfriend snagged an awesome $1299 MacBook Air for only $137.93, its being delivered tomorrow. I would be a fool to keep paying high retail prices at places like Walmart or BestBuy, when I even sold a 37" HDTV to my boss for $600 that I only paid $78.24 for. I use two sites, both are good, SnagBids.com
and BidsGo.com

May 17 2011 at 10:04 AM Report abuse rate up rate down Reply
boardman3

I own Proctor and Gamble stock because I owned Gillette stock and it became absorbed by PGt. Buffet did the same thing on a larger scale.

May 16 2011 at 4:21 PM Report abuse rate up rate down Reply
zekandzora

Just more spin and the usual B.S. from the corporately owned and controlled mass media. It's now {The Mass Media} what George Orwell referred to as "The Ministry of Truth" in his book, "1984". "Big Brother's" mouth piece of propaganda. In a world where "2 + 2 = 5" anything can be the truth. "What is the truth?". "What ever Big Brother says it is."

Our government has been stolen from us. It does not serve us. We serve the government­. The Revolution­ary War was precipitat­ed over far less oppression from the British Crown than we are now experienci­ng from our own out of control government­. We no longer have of government that is "of, by and for the people". It's really of, by and for the globalists and the super rich financial dynastic families behind the world's central banks and Fortune 500 Companies.

Our government is in the total control of the internatio­nal bankers through The Federal Reserve, Investment Houses, like Goldman Sachs, and the huge multinatio­nal corporatio­ns. Pay-offs and bribes, blackmail and threats are their stock in trade for control.

These same corporations own and control 95% of the mass media. A.P., REUTERS, NBC, CBS, ABC, MSNBC, CNN, FOX, WESTWOOD ONE, NEW YORK TIMES, WALL ST JOURNAL, CHICAGO TRIBUNE, AND JUST ABOUT ANY OTHER MAJOR NEWS PAPER YOU CAN THINK OF. All major Hollywood productions. All of the information through the major media is strictly controlled, by spin, editing and good old fashioned out and out lies. T.V. is the primary disinformation, brainwashing and societal change mechanism. We are trained to think what our owners want us to think. We are trained to buy what they want us to buy. We are trained to believe what they want us to believe.

They give you the candidates of THEIR choice. It is the old game of "Heads I win and Tails, you lose". They want you to believe you have a choice. You don't have a choice. Just to be sure, they can and do rig elections with their computer voting machines. As Uncle Joe Stalin said that "they who vote mean nothing but they who count the votes mean everything."

They are globalists and want the complete economic destructio­n of the good old USA so we can be peacefully herded into their Utopia which they and their minions refer to as "The New World Order".

Hungry people are easy to control.

Herr Heinrich {Henry} Kissinger has said, "Vee kontrol zee nazuns vith zee oil and vee kontrol zee peoples vith zee food". Henry has been a water boy for the globalists­, specifical­ly the Rockefelle­r syndicate, for at least 45 years. His power far exceeds that of the President. Zbignev Brezenski, who is a special consultant to the President, has served the same interests for at least 40 years. He too has power above the office of President.

If you look behind the curtain { The Major Media Propaganda } you can find the truth.

May 13 2011 at 3:24 PM Report abuse rate up rate down Reply
rgplapokr

ignorance on all comments, PG pays a dividend of just over 3%, that payout is approx. 49% of their earnings, ie. that money goes to the shareholders in quarterly payments. Warren Buffet owns 9% of PG. Like DUH for all the comments, buy the stock and sleep peacefully. I have owned PG for over 20 years, still buy on stock price dips.

May 12 2011 at 7:48 PM Report abuse rate up rate down Reply
1 reply to rgplapokr's comment
dreamonks1221

Where are you . Please call me. LS

May 30 2012 at 9:51 PM Report abuse rate up rate down Reply
Hey Jude

KIHNMAINT:
...helps PG maintain a healthy dividend ratio which is around 48% of the cash it generates.

What did you think it was?? 50% of what?

May 12 2011 at 4:11 PM Report abuse rate up rate down Reply
thomasva6

yes great stock but if gas prices keep rising it's transportation costs will cut into it's profits.

May 12 2011 at 3:16 PM Report abuse -1 rate up rate down Reply
kilnmaint

50% dividend payout??

May 12 2011 at 1:54 PM Report abuse rate up rate down Reply
stonehw

I dont understand what the two comments have anything to do with P&G

May 12 2011 at 11:38 AM Report abuse +2 rate up rate down Reply