There Is No Need to Gamble; Buy P&G Shares for Growth and Income

Investors can never predict the next event that will send the stock market reeling: a bad jobs report, a threat to the oil supply or an unexpected political scandal.

That is why investors need stocks that have been tested in all kinds of economic weather, ones that can guarantee profits, not just for a year or two but for a lifetime.

It would be hard to find a company with a longer track record than Procter & Gamble (PG) . The company has been paying dividends for more than a century, and its record of capital appreciation is also outstanding.

The company's many leading brands are familiar to anyone who has ever set foot in an American supermarket. They include Bounty paper towels, Crest toothpaste, Gillette razors, Head & Shoulders dandruff shampoo, Pampers diapers and Tide detergent.

P&G has been able to stay ahead of formidable rivals such as Kimberly-Clark.

These products are sold in more than 180 countries. The company has more than a dozen individual products that generate more than $1 billion in annual revenue each.

Because its products are such staples in American homes, the company's financial numbers fluctuate less than many other companies based on the ups and downs of the business cycle. P&G may never see explosive growth, but it is more insulated from risk than most companies its size.

The economic recovery is already one of the longest of the post-World War II era, which means that the U.S. will probably have a recession at some point in the next four years, no matter who wins the presidency. But though an economic downturn might cause Americans to put off buying the latest electronic gadgets, they are unlikely to stop buying laundry detergent or toilet paper.

Over the past five years, P&G has made great progress streamlining its operations, focusing on its core brands that bring in the most profits and selling off those that don't.

Two years ago, P&G's management said that it would concentrate on 70 to 80 brands that accounted for 90% of sales and more than 95% of profit.

As for income, P&G began paying dividends in the 19th century, continued all through the 20th and shows no sign of stopping in the 21st. The company has raised its dividend in each of the past 60 years and offers an annual dividend yield of 3.08%, significantly more than a 10-year Treasury note and just as safe.

With a big market share in the U.S. and a considerable presence in Europe, the company is expanding further into developing economies. It has been highly successful in marketing Pampers, which has had an average 5% annual revenue growth during the past four years, in countries such as China and India, where many families are only beginning to buy disposable diapers.

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Thomas Scarlett is an independent contributor who at the time of publication owned none of the stocks mentioned.

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