Difficult times require essential goods – plus, defensive assets with strong fundamentals and good historical yield. It appears that difficult times may be approaching sooner than expected. So, let’s look at the potential of Procter & Gamble stock to act as a safeguard in volatile markets.
The word “recession” is being mentioned by experts more and more frequently with regard to the US economy. These economic conditions are now being discussed not only in the long term but also in the near future. Among the proposed dates is the later half of 2023 or the end of the year, when the Federal Reserve will finally conclude its series of interest rate hikes – and the consequences of this hawkish policy will chase the United States economy.
The general situation in the US stock market probably won’t be too cheerful, either. However, there are always assets that perform well during market downturns. Procter & Gamble, or just PG, might be one of them. By the way, if you're looking for suitable stocks to add to your portfolio, you can utilize specialized tools like stock screener. You set filters based on your requirements, and the screener shows a list of securities by these criteria.
Procter & Gamble stock has shown an impressive growth of nearly 100% in the last five years.
These are significant figures, it seems. But it's essential to make a comparison. Therefore, let's consider the performance of the S&P 500 index as well, as it enables us to determine whether PG has outperformed the market or not (yep, PG stock has done it).
It's worth noting that Procter & Gamble stock hasn’t grown in 2023; the asset has actually lost 1% of its price. However, what lies ahead? Toilet paper, razors, shampoos, diapers, and similar goods are definitely defensive assets. And Procter & Gamble manufactures all of them under various well-known brands such as Tide, Pampers, Head & Shoulders, Gillette, you name it.
Regardless of whether this period can be classified as a crisis, it won't deter individuals from purchasing essential items like toilet paper – this is the answer. Moreover, in the case of well-established brands of essential goods brands, there are loyal customers. Usually, people don’t want to choose a new razor or shampoo every time they go shopping if they’ve already found products that suit their needs.
The critical factor to consider here is inflation. Prices in shops will continue to rise, but customers always have the option to choose more affordable alternatives. In fact, this shift has already begun.
The latest Procter & Gamble’s report revealed that in Q3 2022, YoY prices rose by 10%, resulting in decreased sales volumes. The most affected units were fabric and home care products, and the least – were health and beauty segments. But it’s important to understand that rising prices and decreasing sales create a delicate balance.
One more factor in favor of PG is its consistent dividend history. The company has been paying dividends for so long that Adam and Eve might have received them.
Most analysts believe that Procter & Gamble stock could deliver positive results in a medium-term or long-term perspective. The consensus forecast suggests a growth of +11% over the next 12 months. Nevertheless, it's essential to remember that any forecast should supplement your own research.
