Buy Procter & Gamble… But Only When This Happens

With new cases of the coronavirus spiking in the US and worldwide.

With the already historic unemployment levels and job losses in recent months.

With massive uncertainty in hospitals, banks, and other industries.

And with many Blue-Chip stocks looking vulnerable when they’re supposed to be among the best areas to invest your capital.

There are few safe places to invest today.  And this number grows smaller every day this crisis lasts.

The key to continue compounding your investments and build wealth is to keep investing well over time.

Most people think the number one way to do that is to invest in assets that will grow your capital.

And this is a huge part of things.

But another huge part of this is also losing as little capital as possible.

The fewer investment losses you have the more capital you keep.  And the more capital you keep the faster you can invest well to grow your wealth.

In recent articles I’ve shown you several stocks to avoid investing in.

Today, I want to show you why to Buy Procter & Gamble…  But Only When This Happens.

Procter & Gamble (PG) is one of the worlds largest consumer goods companies.  It runs 21 separate businesses that do more than $1 billion per year in revenue.

And some of its most well-known brands that we use every day are…

  • Charmin toilet paper
  • Tide laundry detergent
  • Pantene shampoo
  • Pampers diapers

And many others.

Its based in Cincinnati Ohio.  It has a $334 billion market cap. And it pays a large 2.4% dividend… Which is reason #1 to consider buying its stock.

Procter & Gamble’s 2.4% Dividend

Over the last decade PG’s paid out a total of $25.52 per share in dividends.

At today’s count of 2.620 billion shares that’s equal to $66.86 billion paid out to shareholders in that time.

Plus, it raised its dividend 55.8% in the last decade from $1.97 per share in 2011 to $3.07 per share now.

These dividend payments help you earn cash if you take the money out.  Or allow you to buy more shares over time if you reinvest the dividends.

It can do this because it earns huge profits.  Which is reason #2 to buy PG to Depression Proof Your Portfolio.

PG Earns Huge Profits

Over the last decade it earned an average operating income margin of 19.6% per year.

I look for anything above 10%.  

Another way to see how profitable a company is with its free cash flow to sales ratio (FCF/Sales). Over the last decade its 15% per year on average.

I call this the “Cash Machine” metric.

I look for anything above 5% on a consistent basis for the same reasons as I look for high operating profit margins above.  If a company surpasses both thresholds it makes it a great operating business that is safe and valuable.

PG’s margins on both important metrics are gigantic… This not only means it’s a great operating business… But show its one of the best and most consistently profitable in the world.

This already gives it a huge margin of safety… But these large profits also allow PG to have low debt levels which adds even more.

PG Has Low Debt Levels

It has $13.4 billion in cash compared to $31.7 billion in debt.

As a percentage of its balance sheet, total liabilities make up 59.7%.

Its debt makes up 9.5% of its current market cap.  Which is the lowest I’ve talked about in these articles.

And its debt-to-equity ratio is 0.51.

These are all well below the thresholds I look for when considering debt, cash, and balance sheet strength.

This adds another gigantic layer of margin of safety to potentially investing in PG… 

But what about its valuation?  Is it cheap enough to buy? 


With the markets at or near all-time highs you’d expect a great stock like PG to be selling at an enormous valuation.

And unfortunately, it is.

As of this writing its P/E is 25.5.

Its P/CF is 19.5.

Its forward P/E is 24.9.

And its enterprise value to operating income – EV/EBIT is 20.3.

On all three metrics at the top, I look to buy investments below 20 to consider them undervalued.

And on EV/EBIT I look to buy stocks below 8.

These show that PG is overvalued right now.  And doesn’t offer us enough margin of safety in investing terminology.

When you invest in stocks that have a margin of safety it makes the investment safer.  And it also means you should expect to earn higher returns owning it in the coming years.

The inverse of this is also true…

When you invest in a stock without a margin of safety it makes the investment riskier.  And it also means you should expect to earn less owning it going forward.

With PG overvalued, it doesn’t give you enough margin of safety to buy now.  

For this reason, I recommend you avoid buying its stock until its cheaper.


If you’re looking for a solid, safe, stable, and enormously profitable investment to buy to Depression Proof Your Portfolio – consider investing in PG. But only when its cheaper.

Click here to see some of the stocks we recommend to Depression Proof Your Portfolio.

Disclosure – Jason Rivera is a 13+ year veteran value investor who now spends much of his time helping other investors earn higher than average investment returns safely. He does not have any holdings in any securities mentioned above and the article expresses his own opinions. He has no business relationship with any company mentioned above.

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