With stocks off to a lackluster start in 2014, maybe you’re thinking of getting defensive by investing in consumer staples. If so, there are, of course, the big guys, like Procter & Gamble and Kimberly-Clark. But don’t short-change yourself and overlook Church & Dwight, the maker of Arm and Hammer and Oxiclean products.
The Ewing, N.J.-based company recently reported that 2013 earnings per share rose 14 percent, boosted by domestic and vitamin sales. Its pallet of products, which tend to be lower priced than some of its competitors’ products, has given it an edge as shoppers look to cut costs where they can, the company says.
To put things in perspective: Church & Dwight has a market value of about $8.79 billion. Procter & Gamble’s is more than $206 billion, while Kimberly-Clark, the maker of Kleenex brands, is valued at more than $40 billion. Church & Dwight’s sales last quarter were $822.6 million, while Procter & Gamble’s were $22.3 billion.
Church & Dwight’s stock has outperformed the consumer-staples industry, rising 183 percent over five years and beating the S&P 500 Consumer Staples Index’s 130 percent gain. This year, the shares are down 3.5 percent, twice as much as the broader S&P 500 Index.
Here are some reasons to look more closely at Church & Dwight:
- The board has authorized buying back as much as $500 million of its shares. (See this Money and Markets article for more on share buybacks.)
- The company has raised its dividend 18 years in a row, quadrupling it over the past five years. Church & Dwight said its dividend would increase 11 percent this year, from 28 cents a share per quarter to 31 cents.
- The company plans new product launches in all of its core business areas, including an Oxiclean detergent and bleach, and an Arm and Hammer cat litter.
- In addition to increasing sales, management is expanding its profit margin. Its gross margin gained 80 basis points to 45 percent last year.
- Church & Dwight has an A+ Weiss rating. In comparison, Procter & Gamble, Kimberly-Clark and Johnson & Johnson have A- ratings.
- Church & Dwight in December said it will boost its production of gummy vitamins by 75 percent, as it sees the vitamin business as “strategically important” to the company and expects it to be a significant contributor to the future growth of sales, earnings and cash flows.
- Earnings per share should rise from 6 percent to 10 percent this year, the company forecast.
Best wishes,
The Money and Markets Team
About Weiss Ratings: The Weiss Ratings Model objectively weighs the risk and reward of investing in stocks traded on U.S. exchanges. The ratings range from A+ (excellent) to E (very weak). While A and B are equivalent to a “buy” rating, a C rating is a “hold,” and D and E are equivalent to “sell.” The ratings are updated daily. The ratings are intended as investment tools, but not necessarily as investment recommendations in and of themselves.
