How Good Has PG Stock Actually Been?

There was a time when consumer staples stocks, including Procter & Gamble (NYSE: PG), were considered portfolio bedrocks. Prized for steady dividend payments and lower drawdowns during market pullbacks, this sleepy sector has provided investors with shelter from storms such as bear markets and recessions.

For investors embracing individual stocks, Procter & Gamble has been a default staples option. After all, it's the company behind many famous brands, including Crest, Gillette, Tide, Pampers, Charmin, Dawn, Duracell, Vicks, and many more.

Yet those premium labels and their high market share haven't been enough to juice the stock. In fact, calling shares of the Head & Shoulders maker duds isn't mean. It's accurate.

Procter & Gamble is a reliable dividend payer, but the shares haven't done much to brag about. Image source: Getty Images.

Investors' tastes shifted, P&G didn't go along for the ride

Procter & Gamble is subject to consumer whims, but it's a public company, so it's also exposed to shifting tastes among investors. Said differently, many market participants have fallen in love with artificial intelligence (AI) and growth stocks in recent years, and they've been rewarded for that adulation.

What hasn't been rewarded are consumer staples stocks. For the five years spanning 2020 to 2024, the sector ranked among the top five just once -- in 2022, when stocks slipped into a bear market. That's not saying much because there are just 11 S&P 500 (SNPINDEX: ^GSPC) sectors. During that time, Procter & Gamble returned $1 for every $5 returned by the S&P 500.

Data by YCharts.

Perhaps the most damning indictment of this staples stock is that over the past three years, investors could have done significantly better with less risk by holding a basic aggregate bond fund like the iShares Core Aggregate Bond ETF (NYSEMKT: AGG) or the State Street Consumer Staples Select Sector SPDR Fund (NYSEMKT: XLP).

Data by YCharts.

Things aren't going to be much better for the stock when 2025 draws to a close. It's down almost 10% year to date. As of the end of the third quarter, staples was the second-worst performing sector in the S&P 500, defying expectations that 2025 would bring a return to normal for the group.

A bright spot with Procter & Gamble

The primary source of allure with this stock is the dividend. The Pampers maker has pampered investors with 135 straight years of dividends and 69 consecutive years of payout increases, making it a Dividend King (a company that has raised its dividend yearly for 50 years or more). Importantly, the company projects payout growth of 4% to 6% annually. In most years, that's good enough to outpace inflation.

Add to that, the dividend is sustainable because Procter & Gamble's operating and free cash flow surged in the third quarter, and earnings per share are expected to rise this year. In fiscal 2025, the company earned $6.51 a share, well ahead of the dividend obligation of $4.48 a share.

So what we have is a reliable dividend payer, not a story stock. Investors need to reconcile that and consider this stock against their personal levels of risk tolerance. In very simple terms, Procter & Gamble is suitable for retirees looking to de-risk their portfolios; for a 25-year-old looking to build wealth, not so much.

Todd Shriber 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.