I have owned shares of Procter & Gamble (PG) for several years now and it is my second largest holding. That is mostly due to PG stock not declining as much in value as many of other stocks in my portfolio. P&G has been a stable slow growth dividend stock that has done very well over the years. Gene Marcial had a very good write up on PG yesterday in BusinessWeek.com. Here are some of the highlights. Marcial: Procter & Gamble, Durable in a Downturn

Procter & Gamble, Durable in a Downturn
A robust return on equity, steady earnings growth, and recession-resistant products make the consumer-goods titan a strong defensive play

Only a few of the mightiest of the blue chips have been able to weather the global financial crisis and economic recession without big hits to their earnings power.

Procter & Gamble (PG), the world's largest consumer-products company, is one of those few. "P&G's perfect marks for price stability and earnings predictability, and its healthy dividend yield, make it a valuable holding in a diversified portfolio," says Orly Seidman, an analyst with independent investment research outfit Value Line.

Known for such consumer standbys as Tide laundry detergent, Pampers disposable diapers, and Duracell batteries, P&G has demonstrated over the years that regardless of economic conditions, it can deliver steady returns on equity and predictable earnings growth year after year.

Strong Return on Equity
"P&G has withstood the economic headwinds a little better than the rest of the crowd," says Eric Schoenstein, co-manager of the Jensen Portfolio (JENSX) fund, which concentrates its stock holdings in companies that have posted a yearly 15% return on equity (ROE) in each year over the past 10 years, A stock doesn't get into the portfolio unless it has met this hurdle. A strong ROE, explains Schoenstein, is one of the key qualities a company must have to sustain its competitive advantage—and earnings growth—over the years.

Certainly the financial crisis and economic downshift have had an impact on the stock, but to a lesser degree than other companies' shares. Trading at a 52-week high of 75.18 a share on Dec. 12, 2007, the shares had slid to 61.44 by Dec. 2—a 27% decline, vs. the 40% plunge in the broader market.

The drop has made P&G an even more attractive investment, says Schoenstein, as "it has further widened the gap between the stock price and its intrinsic value." While the shares have fallen, the company's earnings growth has continued to advance, he says.

Over the next several years, "P&G is expected to deliver consistent sales and earnings growth near the high end of its peer group," says Loran Braverman, an analyst at Standard & Poor's, who rates the stock a strong buy. (S&P, like BusinessWeek, is a unit of The McGraw-Hill Companies (MHP.) Demand from developing countries for P&G's household and personal-care products is one source of growth, he says, helped by the company's broad product portfolio and sizable distribution network.

North America is the biggest market among the more than 180 countries in which P&G operates. Some 44% of sales come from that region, with 30% from developing countries, 22% from Western Europe, and 4% from Northeast Asia. In the U.S., Wal-Mart (WMT) accounted for 15% of the company's sales. Among products, fabric care and home care generate 28% of sales; beauty products, 22%; health care, 18%; family care, 16%; and grooming, 10%.

With equity prices gyrating wildly, how much is P&G's stock really worth? Braverman's 12-month target is 78 a share.

One way P&G is able to manage its consistent profit growth is partly through a "tenured and talented management team" that makes sure the company has a solid balance sheet and a plan for sturdy earnings prospects, says Jensen Portfolio's Schoenstein. Management is constantly assessing its portfolio of products to make sure they are in the right growth markets at the right time, he says.

Indeed, P&G's premier virtue is that it is a classic defensive stock, well positioned for an economic downturn. And it should do nicely when the economy recovers—whenever that is.

Disclosure: The Div Guy owns shares of PG at the time of this post.