Matt DiLallo, The Motley Fool
When a 70-year dividend grower like Procter & Gamble (NYSE:PG) falls 18.5% from its all-time high, pushing its yield up to 3%, it’s hard not to get intrigued. That seems like a real opportunity to buy shares of a high-quality company at a meaningful discount. However, it’s important to question whether this decline is a gift or a warning.
I’m taking a deep dive into Procter & Gamble stock as I consider adding it to my portfolio. Here’s why I’m beginning to conclude that while it’s facing some real headwinds, the Dividend King — a company with 50 or more years of annual dividend increases — is starting to look like a real opportunity these days.
Missed AI’s “Act 1”? Act 2 Could Be 14x Bigger. Most investors think they missed the AI boat because they didn’t buy Nvidia in 2005. But according to our analysts, we’re only at the end of “Act 1″—the R&D phase. “Act 2” is the global rollout. Continue »
Image source: Getty Images.
Why Procter & Gamble might be a trap
Let’s start with the negatives. Procter & Gamble’s fiscal 2026 financial results weren’t all that good. Its net sales rose 3% to $87 billion, while it delivered meager 1% organic sales growth. Likewise, its core earnings per share (EPS) were only up 1%. Meanwhile, it ended the year on a sour note, with organic sales flattening (though net sales rose 2%) while core EPS fell 3%. Its results fell short of its long-term growth algorithm, which calls for delivering organic sales growth ahead of the market and mid-to-high single-digit core EPS growth.
The company is facing several headwinds, including higher input costs and eroding market share. Persistently high inflation is causing more consumers to trade down to lower-cost, non-branded products. The biggest question is whether this shift is structural or cyclical.
Procter & Gamble expects its headwinds to persist in fiscal 2027. It sees higher raw materials, energy, and transportation costs, increased interest expenses, and unfavorable foreign exchange rates as having a $1 billion, or $0.56 per share, impact on its core EPS growth rate this year. That’s an 8% drag on earnings growth. As a result, it expects core EPS to be flat to up 3%. Meanwhile, it sees organic sales growth of 1%-3% this year. Both below its long-term targets.
Why the current headwinds are creating a real opportunity
With its stock currently down about 18.5% from its all-time high, Procter & Gamble trades at around 22 times forward earnings. That’s down from over 30 times earnings at its peak and from its historical average over the past decade in the upper 20s.
