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Dividend Investing Stocks (Archived)

CHD - Church & Dwight Co. Inc.

Dividend investing is a popular strategy with investors seeking an income stream. Dividend investors can be placed into two broad categories.

  1. The growth approach - buy dividend paying stocks with emphasis on the company's ability to grow and increase its future dividend payments (to maximize the future yield).
  2. The yield approach - buy dividend paying stocks at cheap prices (to maximize the current yield).

Dividend investors using the growth approach tend to look for the same basic growth characteristics as found with growth investing, but the stock must also pay a reasonably reliable dividend.

Dividend investors using the yield approach tend to be more concerned with the stock price and the companies ability and willingness to pay a regular dividend rather than its ability to expand.

Sometimes a company will satisfy the requirements for both approaches.

In the July 2014 issue a fundamental analysis is conducted on a selected sample of stocks. The analysis is based on fundamental data from one year ago. This allows financial students and investors to see how the stock price performed over the next 12 months after the hypothetical purchase.

Church & Dwight Co. Inc.

Church & Dwight Co. Inc. NYSE:CHD is a mid-cap company in the household products industry and its stock trades around $35 million per day. CHD is a mature company that was founded in 1846 and has a long established history of paying dividends.

The key fundamentals for CHD are shown below.

Growth fundamentals for CHD

YearRevenueEPS ROEDividendBook ValueEmployees
200310500.66 18%0.113.602260
200414600.70 16%0.124.403740
200517300.95 18%0.125.403700
200619401.08 16%0.146.603700
200722201.28 16%0.168.203700
200824201.38 15%0.189.503500
200925201.75 15%0.2611.403700
201025801.90 14%0.4113.103600
201127402.17 15%0.7514.303500
201229202.51 17%1.0014.904400

The fundamental data above shows that CHD has broadly increased its revenue, earnings, book value and employees over the last decade. These are the characteristics of an expanding company which indicates that CHD is a growth stock that pays a regular dividend. Also the annual dividends have increased considerably over the last decade.

Fundamental Analysis for CHD:

The return on equity is good and is consistent over the years. The profit margin (profit to revenue ratio) is reasonable at around 11%.

The current ratio (current assets to current liabilities) ranges from 1.3 to 2.0 which indicates that CHD has a sufficient amount of working capital.

The debt ratio (long-term debt to tangible assets) averages around 1.5 which means that CHD carries a moderate amount of long-term debt. Intangible assets and goodwill are not included in the ratio calculation. The tangible assets are used for the ratio calculation because these are hard physical assets that can be sold off in the event of bankruptcy liquidation whereas intangibles and goodwill cannot be sold.

The total ratio (total liabilities to total assets) averages around 50% which means that CHDs total debt is 50% of its total assets.

The earnings growth for the 2013 fiscal year is projected to grow at 10% (based on the five year earnings growth trend). The revenue is projected to grow at 4% (based on the five year revenue growth trend).

The forward PE ratio is around 22 (calculated from the five year earnings growth trend rather than from forecast earnings). The forward PEG is around 2.0.

The current business valuation would drop to around $20 if CHDs earnings growth stops (with a 2.5% ten year Treasury bond yield).

CHDs book value is around $15 and if CHD does run into financial problems in the future this gives an idea of how far the stock price could drop.

The bankruptcy risk can be calculated using the Z-score. CHDs Z-score is 3.8 which means CHD is a low bankruptcy risk stock.

The sample analysis uses data that is one year old. The hypothetical purchase date for the stock is 21-Jun-2013 and this allows the reader to see how the stock performed over the next year.

CHD had its 2013/03 quarterly results released prior to 21-Jun-2013 and this information is available for the analysis. The 2013 Q1 earnings showed an increase of 14% over the same quarter from a year ago (2012 Q1). The 2013-Q1 dividend is $0.28 for the quarter which is a 17% increase over the same quarter from a year ago (2012 Q1).

Overall the fundamentals are strong with this large-cap dividend paying stock which has the characteristics of a growth stock as a bonus. Additional information such as consensus forecast earnings, broker recommendations and insider transactions are not considered for this sample analysis. A hypothetical position taken in CHD on the 21-Jun-2013 would give a purchase price of around $60.

The stock price performance is shown below in Chart 1. along with the annual earnings year to year growth. The stock chart is adjusted for splits and dividends.

Chart 1. Stock chart with earnings for CHD

weekly Chart CHD

As shown in Chart 1. above, CHDs gained around 15% over the next year including dividends. CHDs 2013 annual earnings increased by 14% over the 2012 fiscal year and its 2013 dividends were $1.15 which is an increase of 15% over the 2012 fiscal year.

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