Church & Dwight (NYSE: CHD) It might not exactly be a household name, but chances are you’ve heard of many of the company’s brands: ARM & HAMMER, Trojan, First Response, Nair, Spinbrush, OxiClean, Orajel, Vitafusion, WaterPik and ZICAM.
If you’re already familiar with some of the company’s big brands, you may be close to considering a serious investment. Let’s take a look at Church & Dwight’s background, what you need to know before investing (including reasons to consider the company and why you might want to avoid it), and whether the company makes sense for your needs specific investment. Let’s get started.
About Church & Dwight Co. Inc.
Church & Dwight Co. Inc., an Ewing, New Jersey-based manufacturer of household products, is best known for ARM & HAMMER baking soda and the wide variety of products that have come out of that line, including detergent and paste of teeth
The company began in the mid-1800s. In 1846, Dr. Austin Church and John Dwight, brothers-in-law, launched sodium bicarbonate (baking soda) for commercial distribution, known today as ARM & HAMMER. His first factory started in Dwight’s kitchen and was packed in paper bags.
In the 1980s and 1990s, ARM & HAMMER launched the first baking soda detergent, both powder and liquid laundry detergents, and later branched out into toothpaste, carpet deodorizer and cat litter .
In the early 2000s, Church & Dwight acquired Carter Wallace’s consumer business, which included personal care brands Trojan, First Response, Nair and Arrid.
In 2006, the company expanded its portfolio of household brands when it acquired Orange Glo International and OxiClean, Kaboom bathroom cleaning products and Orange Glo household cleaning products. It also bought Orajel in 2008, Batiste Dry Shampoo in 2010 and Simply Saline, a nasal hygiene brand. It also acquired Feline Pine, a brand of cat litter.
The company also acquired Agro BioSciences in 2017 and Microbial Terroir, a proprietary microbial solutions platform and bought Water Pik Inc. In 2019, it acquired Flawless, which offers a variety of electric hair removal products.
In the first quarter of 2022, net sales grew 4.7% to $1,297.2 million. Organic sales grew 2.7% and prices grew 7.8%, offsetting a -5.1% volume decline due to supply chain disruption and price elasticities. EPS for the first quarter of 2022 was $0.83, which was down 5.7% compared to 2021.
Reasons to consider investing in Church & Dwight stock
Why do you want to buy Church & Dwight stock? Let’s take a look:
- Strong consumer demand: The company continues to experience strong consumer demand due to its seemingly indestructible (or at least recession-proof) portfolio due to its well-cultivated brands. One of the reasons it is successful is its ability to bring value to consumers, including offering laundry detergent brands at a massive discount compared to Procter & Gamble brands, for example. When people are looking for a cheaper alternative, Church & Dwight can fill that need.
- Consistent dividend increases: Church & Dwight has a dividend yield of 1.13%, an annual dividend of $1.05, a dividend payout ratio of 32.21% and has offered a consistent dividend increase over the past 27 years . Church & Dwight pays out 32.2% of its earnings as a dividend, indicating a healthy payout ratio. The company has no problem covering its dividend payments and could do so on an ongoing basis. The company also has strong institutional ownership of its shares.
- Cash flow: Because cash flows are important when evaluating a dividend, Church & Dwight’s free cash flow margins have grown steadily over the past decade. The company’s average free cash flow margin is 16.4% and the five-year average is 17.4%.
- Listen to consumers: Church & Dwight has focused on four main brands: ARM & HAMMER, OxiClean, Trojan and vitamins (primarily for children, including Vitafusion and Lil’ Critters). During the pandemic, consumers formed new habits of confinement, such as the need to feel presentable for Zoom calls and other at-home solutions (encouraging the use of dry shampoo, waxing and waxing at home and beauty regimes at home).
More information: Best growth stocks and dividends
Reasons to avoid Church and Dwight’s actions
Why would you want to be a little cautious before investing in Church & Dwight?
- Underperformance compared to competitors: The stock has recently underperformed some competitors, including Johnson & Johnson, Procter & Gamble Co. and Reckitt Benckiser Group PLC.
- Not the strongest around: It’s always possible to find someone bigger, faster and stronger, and the Dividend Payers are no exception. For example, Mondelez International has higher revenue and earnings in comparison and also has a lower price-to-earnings ratio, indicating that between the two companies, Mondelez is more affordable.
Read more: Are dividend stocks worth it?
You should consider Church & Dwight Co. Inc.?
As a dividend investor, you’re likely looking for a wide variety of factors beyond dividend yields. You’re looking at earnings, company history, share price, market size, management and more. You are also calculating the dividend yield based on the share price and the dividend payout ratio. You’ll likely want to put companies with a long history of financial stability and low volatility in your basket.
Church & Dwight’s earnings per share have continued to rise, and the company has kept its earnings close to its chest (i.e., within the business). Its dividend growth has also continued to grow rapidly over the past few years, and its low payout ratio suggests a sustainable approach to managing its dividends, all of which are positive.
It’s important to consider all avenues of the business, as well as how well it will fit your portfolio. Will the company offer you the best match for your current and future goals? Only you can decide if this company matches your overall portfolio. It’s true that Church & Dwight offers a solid earnings and balance sheet track record, management profile, dividend yield and earnings per share, among other advantages, but it also requires you to examine the broader implications of adding the stock to your portfolio already existing
Read more: 11 High-Yield Dividend Stocks