Procter & Gamble: Mean Reversion?

01/08/2016 8:00 am EST


Charles Carlson

Editor, DRIP Investor

I’ve written extensively over the years about the tendency of Dow Jones Industrial components to perform well after periods of underperformance, explains Chuck Carlson, editor of DRIP Investor.

Procter & Gamble (PG) is one of the worst performers in the Dow Industrials this year, so history says a better year is likely in 2016.

I know that betting on this stock in recent years hasn’t exactly been a profitable strategy.

Wall Street has been frustrated with the company’s growth. And there has been a bit of a revolving door in top management. Still, I think P&G is an interesting mean-reversion story for 2016.

Another reason I like the stock’s chances in 2016 is that I expect some of the global headwinds that have hurt the company—including the strong dollar and weakness in emerging countries—to dissipate a bit in 2016.

Other factors that should help the stock are continued opportunities for restructuring and asset sales, as well as a dividend yield of 3.4%.

I also wouldn’t be surprised to see activist investors apply more pressure in 2016 if the stock remains in the doldrums. I would feel comfortable buying the stock at current prices and look for double-digit total returns in 2016.

Procter & Gamble offers a direct-purchase plan whereby any investor may buy the first share and every share of stock directly from the company.

Minimum initial investment is $250. Subsequent investments are a minimum $50. There is no enrollment fee and no fee to reinvest dividends.

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