A Recession-Proof Stock for Your Portfolio
The realities of a weak economy, rating downgrades, and diminishing Treasury resources have investors ready to hit the panic button. Before you throw in the cards, though, consider a company with a proven track record of withstanding recessions: Procter & Gamble (NYS: PG) , a consumer favorite with a rich history of creating shareholder value.
With more than 4.2 billion people consuming its products daily, P&G is indeed an industry leader. But rising commodity prices could increase production costs and drag down earnings. However, Procter & Gamble should be able to fight off rising costs by minimizing expenses and raising product prices.
The company's winning portfolio of products, which include 24 billion-dollar brands, give it an edge over competitors such as Unilever (NYS: UL) and Clorox (NYS: CLX) . Each of P&G's popular brands generates more than $1 billion in annual sales, and its operating margin of 19.16% is higher than both Unilever's and Clorox's.
Equally as impressive, 12 of the 24 brands are currently the No. 1 global market-share leader in their respective product categories. The company has a lot working in its favor overseas as well, with 15% of sales coming from Asia, 9% from Latin America, and 13% from Central and Eastern Europe. Developing markets in China and the Middle East offer opportunities for big gains.
During great economic upheavals, investors seek healthy dividend payouts -- and P&G offers plenty to smile about with its 3.3% dividend yield. The company has delivered an annual 14.5% increase in earnings per share for more than a decade -- an attractive figure for value investors.
One potential downside is that even though Procter & Gamble's strong earnings, label recognition, and growth potential in emerging markets put it ahead of competitors such as Unilever, shoppers buying generic store brands at the likes of Wal-Mart (NYS: WMT) , and Costco (NAS: COST) could threaten P&G's profitability in the long run.
The company has outlasted more than one recession since its founding in 1837. I'm betting that as one of the world's 100 most sustainable companies, Procter & Gamble is in it for the long run -- as investors should be as well. Find out what other dividend-rich stocks to buy in an uncertain market with this free report: 13 High-Yielding Stocks to Buy Today.
At the time this article was published Fool contributor Tamara Rutter owns none of the stocks mentioned here. Connect with her on Twitter, where she goes by@TamaraRutter. The Motley Fool owns shares of Wal-Mart Stores, Costco Wholesale, and Clorox.Motley Fool newsletter serviceshave recommended buying shares of Unilever, Costco Wholesale, Procter & Gamble, Wal-Mart Stores, and Clorox and creating a diagonal call position in Wal-Mart Stores. Try any of our Foolish newsletter servicesfree for 30 days. We Fools don't all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has adisclosure policy.
Copyright © 1995 - 2011 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.