In the bustling world of Wall Street, the S&P 500 often steals the spotlight. It’s like the ultimate VIP lounge for American companies—where 500 of the country’s top-performing names, from the tech luminaries of Silicon Valley to the financial masterminds of Manhattan, gather to set the bar for market success. This index isn’t just a list; it’s a powerful mirror reflecting the pulse, vigor, and innovation of the U.S. economy.
But in this party of 500, what about the lone wolves—the individual stocks like Procter & Gamble (NYSE:PG) that aren’t just another face in the crowd? How does a tried-and-true household name stack up when you put it under the same spotlight as this financial juggernaut?
In today’s piece, we’re going to take off the gloves and pit these two against each other. We’ll dig into the dynamics, the dividends, and the data to find out whether PG is overshadowed by the S&P 500 or if it’s a scene-stealer in its own right. So grab your financial playbook, because this is one match-up you won’t want to miss.
Investing in Procter & Gamble Alone
When considering the potential for higher returns, Procter & Gamble offers a compelling case.
For example, the company’s share price has expanded 84.0% over the last five years, a notably higher return than the S&P 500’s 52.1%. However, the famous index is already up 15.2% in 2023, when Proctor & Gamble could only deliver a 1.30% increase.
That said, over the last fiscal year (FY), P&G reported some encouraging metrics. The firm’s organic sales outperformed its own expectations with an increase of 7%, while diluted and core EPS rose 13% for the latest quarter.
But wait, let’s toss the SPDR® S&P 500 ETF Trust (SPY) into the mix and see what colors emerge on this financial palette. Despite a modest yield of 1.48%, this ETF has muscled up its dividend growth to an impressive 8.57% over the last year. So, if you’re thinking about dividends, know that comparing SPY to P&G is like comparing apples to…well, a whole fruit salad.
Why the mixed metaphor? Well, the S&P 500 is like a Wall Street All-Star team, with 500 of America’s corporate MVPs. Each one has its own game plan for dividends, impacted by its individual performance, the league it plays in—ahem, industry—and next season’s strategy. Making dividend predictions here is like calling the outcome of a chess game while still in the opening moves.
Let’s not forget that corporate strategy can shift like sand under your feet. Companies are constantly juggling their cash for different plays, be it merging, retiring debt, buying back shares, or reinvesting in the biz. Any zig or zag here can send ripples through your dividend stream, blurring any financial foresight you thought you had.
Yet, the S&P 500 ETF stands out for being more like a calm lake than a choppy sea. While individual stocks like P&G can give you a rollercoaster ride based on company-specific news, an S&P 500 fund offers a mellower journey. With this fund’s broad market coverage, no single company’s shenanigans will yank the rug out from under you, offering a smoother ride and more predictable dividends in the long run.
The decision to select between a diversified index or a specific boils down to risk tolerance primarily. Do you want to take higher risk and bet on a single company and management team or bet on the top 500 CEOs running the largest companies in America as part of a single bet.
Any given company will exceed the returns of the index and fall short for various durations, but over the long-run it’s very difficult to beat the appeal of the index from a risk-adjusted return perspective.
The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.