Up to date on February third, 2023 by Kay Ng
The Dividend Aristocrats are a few of the greatest dividend progress shares an investor will discover. These corporations are within the S&P 500 Index, with 25+ consecutive years of dividend will increase.
We imagine the Dividend Aristocrats are among the many highest-quality dividend progress shares round. For that reason, we created a downloadable spreadsheet of all 68 Dividend Aristocrats, together with essential metrics resembling price-to-earnings ratios and dividend yields.
You may obtain the Excel sheet of all 68 Dividend Aristocrats by clicking the hyperlink under:
Every year, we evaluation the entire Dividend Aristocrats. The subsequent inventory within the sequence is a shopper staple large Church & Dwight Co., Inc. (CHD). Church & Dwight won’t be as acquainted as a few of its shopper staple rivals resembling Procter & Gamble (PG), Clorox (CLX), or Colgate-Palmolive (CL); nonetheless, it has undoubtedly earned its place on the Dividend Aristocrats listing.
Church & Dwight has now elevated its dividend for 27 consecutive years. The corporate’s dividend can also be very secure, with a dividend payout ratio of 36%.
On the similar time, Church & Dwight’s inventory has been in a long-term upward pattern. Nonetheless, the inventory is down about 20% during the last yr as a result of it was overvalued earlier than. It now seems to be, at greatest, absolutely valued in the present day.
Enterprise Overview
Church & Dwight is a diversified shopper staples firm that manufactures and distributes merchandise underneath a number of well-known names like Arm & Hammer, Trojan, OxiClean, Spinbrush, First Response, Waterpik, Nair, Orajel, and XTRA. The corporate was based in 1846, has elevated its dividend for 27 consecutive years, and trades with a market capitalization of $19.8 billion on about $5.3 billion in annual income.
For greater than 100 years, Church & Dwight was a baking soda firm working with solely the Arm & Hammer model. Nonetheless, since 2001, the Firm has acquired 13 of its 14 “energy manufacturers.” Church & Dwight’s acquisitions of main manufacturers have diversified its attain throughout the family and private care area. Additionally, Church & Dwight has paid quarterly dividends to shareholders for 122 consecutive years.
Supply: Investor Presentation
On February third, 2023, the corporate reported fourth-quarter earnings and full-year outcomes for 2022. Complete income for the quarter got here to $1.44 billion, up 4.9% yr over yr.
The corporate noticed natural gross sales progress of 0.4%. It posted a web lack of -$164.7 million for the quarter primarily from a tripling of its promoting, basic, and administrative bills (SG&A), in addition to a 5.8% rise in the price of gross sales, which climbed quicker than income progress. Adjusted earnings per share (EPS) fell -3.1% to $0.62 yr over yr.
For the total yr, income grew 3.6% to $5.38 billion from final yr. Earnings from operations dropped 45% to $597.8 million, once more because of an 84% rise in SG&A to $1.1 billion and a 6.8% enhance in value of gross sales to $3.1 billion. Finally, 2023 web revenue fell 50% to $413.9 million. The large leap in SG&A was because of $411 million of intangible asset impairment fees associated to the Flawless enterprise. Excluding these fees, SG&A would have declined 1.4% yr over yr. The corporate famous adjusted EPS fell solely -1.7% to $2.97.
The corporate additionally introduced a rise in its dividend. It declared a 3.8% enhance within the quarterly dividend from $0.2625 to $0.2725 per share, equal to an annual dividend of $1.09 per share.
Projecting reported gross sales progress of 5-7% and natural gross sales progress of roughly 2-4%, Church & Dwight guided for adjusted EPS progress of 0-4% in 2023. We take the midpoint of this EPS progress charge for our 2023 adjusted EPS estimate of $3.03. For the long run, the corporate targets an 8% EPS progress charge based mostly on 3% natural web gross sales progress and gross margin enlargement.
We count on a 6% annual EPS progress over the following 5 years, comprised primarily of income progress and share buybacks.
Development Prospects
Whereas 2020 was a difficult yr for the worldwide financial system, as a result of coronavirus pandemic, which weighed closely on financial progress, Church & Dwight continued to generate regular earnings. In 2021, the corporate continued to develop its earnings, and the inventory value continued to run increased, with a complete return of 17.5% for the whole yr of 2021.
The most important progress driver for Church & Dwight shall be continued natural gross sales progress and buying stable manufacturers sooner or later. The 14 “energy manufacturers” made up 80% of gross sales and earnings in 2021.
Supply: Investor Presentation
One other progress driver for the corporate is on-line gross sales. For instance, 16% of Church & Dwight’s web gross sales got here from on-line purchasing final yr.
Supply: Investor Presentation
Aggressive Benefits & Recession Efficiency
Church & Dwight’s aggressive benefit comes from its willingness to execute acquisitions and progress in natural gross sales. This growth-by-acquisition technique offers the corporate an everlasting alternative to proceed rising its enterprise for the foreseeable future. CHD can also be modestly recession-resistant. For instance, Church & Dwight’s aggressive benefits permit it to keep up constant profitability every year, even throughout recessions.
Church & Dwight’s earnings-per-share throughout the Nice Recession are under:
- 2007 earnings-per-share of $0.63
- 2008 earnings-per-share of $0.72 (13% enhance)
- 2009 earnings-per-share of $0.87 22% enhance)
- 2010 earnings-per-share of $0.99 (14% enhance)
Durning the COVID-19 pandemic, earnings grew from $2.47 per share in 2019 to $2.83 per share in 2020. This represents a rise of 15% year-over-year.
Valuation & Anticipated Returns
Primarily based on anticipated EPS of $3.03 for 2023, Church & Dwight’s inventory trades for a price-to-earnings ratio of 27.4, utilizing in the present day’s inventory value of ~$83. CHD held a median price-to-earnings ratio of ~26 over the previous ten years. Thus, we predict {that a} truthful incomes a number of is 26.0. Consequently, based mostly on its common valuation multiples, Church & Dwight’s inventory seems to be overvalued.
If the corporate inventory experiences a decline within the valuation a number of to our truthful P/E of 26.0, it’ll cut back annual shareholder returns by 1.0% yearly over the following 5 years.
Earnings progress and dividends will positively impression future returns. First, we count on the Firm to develop earnings-per-share by 6% per yr by means of 2028.
Lastly, CHD inventory has a dividend yield of 1.3%. Placing all of it collectively, a breakdown of our anticipated future returns is as follows:
- 6.0% anticipated earnings-per-share progress
- 1.3% dividend yield
- -1.0% destructive return from valuation contraction
On this projection, complete shareholder returns may attain 6.2% annualized by means of 2028.
Ultimate Ideas
Church & Dwight has most of the traits of a high-quality dividend funding. Most notably, the corporate’s portfolio of manufacturers permits it to develop its earnings by means of most years irrespective of which stage of the financial cycle we’re at. Additionally, Church & Dwight shares its progress with its shareholders by means of constant dividend will increase.
The corporate’s growth-through-acquisition technique is time-tested, and its administration group has developed appreciable experience in scaling smaller manufacturers by means of its present infrastructure. Often, there could be slip-ups resulting in impairment fees like we noticed final yr, but it surely shouldn’t be seen as a norm.
On the finish of the day, the inventory’s valuation is simply above truthful worth. We forecast complete returns accruing at 6.2% yearly, consisting of 6% earnings progress, the 1.3% dividend yield, and a 1.0% headwind from the valuation. Shares earn a maintain ranking.
Moreover, the next Certain Dividend databases comprise essentially the most dependable dividend growers in our funding universe:
In case you’re searching for shares with distinctive dividend traits, think about the next Certain Dividend databases:
The most important home inventory market indices are one other stable useful resource for locating funding concepts. Certain Dividend compiles the next inventory market databases and updates them month-to-month:
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