Procter & Gamble (PG) is about as blue as a blue chip stock can be. Sadly for long-term shareholders, this battleship of a defensive dividend-paying name has delivered underwhelming returns vs the broader market for a very long time.
Founded in the first half of the 19th century, P&G has grown into the world’s largest consumer products company by market value, boasting a vast portfolio of billion-dollar brands. From Tide laundry detergent to Crest toothpaste to Pampers diapers, today, P&G sells its wares in more than 150 countries.
And yet even as Procter & Gamble expanded its dominance in the U.S. and spread around the globe, it never wavered in its commitment to returning cash to shareholders through dividends. Indeed, P&G has paid uninterrupted dividends since 1891.
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Even more impressively, P&G has increased its payout every year for nearly seven decades. As a member of the S&P 500 Dividend Aristocrats, Procter & Gamble has more than earned its reputation as one of the best dividend stocks to buy for dependable dividend growth.
Between its dividend increases and the fundamental nature of its business – sales of toothpaste and diapers tend to hold up in tough times – PG stock is considered a classic defensive name.
Heck, this Buy-rated Dow Jones stock has been a component of the blue-chip benchmark since 1932.
There’s no questioning the company’s illustrious history. P&G stock’s past performance, however, isn’t quite as distinguished.
The bottom line on PG stock?
There’s no way around it: P&G stock has been a market laggard for ages.
To be fair, over its lifetime as a publicly traded company, PG has outperformed the broader market, generating a total return (price change plus dividends) of 11.1%. The S&P 500’s total return comes to 10.6% over the same span.
That’s good.
The problem is that if you look at time frames more relevant to shareholders alive today, Procter & Gamble stock is kind of a bust.
It lags the broader market on an annualized total return basis over the past one-, three-, five-, 10-, 15- and 20-year periods – and by painfully wide margins, too.
To get a sense of what this underperformance looks like on a brokerage statement, have a look at the above chart. It shows that if you put $1,000 into P&G stock 20 years ago, it would today be worth about $5,200. That’s an annualized return of 8.6%.
The same thousand bucks invested in the S&P 500 would today be worth about $7,600 – or an annualized return of 10.7%.
Past performance is not a guarantee of future results, and Wall Street does mostly like P&G stock at current levels. Of the 25 analysts covering PG surveyed by S&P Global Market Intelligence, 11 call it a Strong Buy, five rate it at Buy and eight say Hold. A lone analyst has a Sell recommendation on the name.
That works out to a consensus recommendation of Buy – albeit with somewhat mixed conviction.
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