Why Investors May Want to Buy Procter & Gamble if Consumer Spending Cools
Key Points
P&G has consistently raised its dividend for more than 70 years.
The company's dividend yield is currently around 3%.
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Consumer confidence decreased in August, according to The Conference Board's Consumer Confidence Index. This was the second straight month in decline. If September's report shows the same trend, investors might start looking for stocks that can prove resilient through tough economic times.
Procter & Gamble (NYSE: PG) fits the bill about as well as a company can. Let's have a look.
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P&G has raised its dividend for 70 consecutive years. Not many businesses can claim that. Among Dividend Kings, or companies that have raised dividends for 50 years straight, only P&G and five other members qualify for that ultra-elite group. The dividend is also well-funded, as P&G's earnings per share and free cash flow comfortably exceed the amount needed. The company's payout ratio is around 64%.
P&G is diversified within its products. Everything consumers need, ranging from diapers to toothpaste, razors, and detergents, is held within its portfolio of everyday household staples. These are products that people will continue to buy regardless of macroeconomic conditions.
While discretionary spending is normally cut first, consumer staples are more resilient. Globally, North America has been relatively soft for P&G, but sales in Latin America and Europe have helped offset it.
Image source: Getty Images.
The stock is down more than 11% from its 52-week high of $167. This has made the company's dividend yield even more attractive, with the yield currently hovering around 3%. For income-oriented investors, this is a solid entry point.
This company isn't necessarily a growth story, but if you're keeping a close eye on consumer confidence, the consumer staples giant has a defensive brand portfolio and a secure dividend. If spending across the country cools, I'd look for a haven in P&G.
Should you buy stock in Procter & Gamble right now?
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Catie Hogan has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
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