Is This Expensive Stock Getting Cheap?

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A consumer staple dividend growth stock with a portfolio of fantastic products?

That’s a good way to describe Church & Dwight Co., Inc. ($CHD). Founded all the way back in 1847, this is a consumer staple business that makes a lot of great products but is also overshadowed by bigger-name firms like Procter & Gamble or Colgate-Palmolive.

Church & Dwight owns the Arm & Hammer, Trojan, OxiClean, and Orange Glo brands.

Many of these brands operate across multiple consumer categories. Arm & Hammer’s product line, for example, includes: baking soda, toothpaste, deodorant, laundry detergent, and cat litter.

Church & Dwight is a stock that I’ve owned for years.

However, I’ve never added to this position, beyond dividend reinvestment, because Church & Dwight stock usually trades at an extreme valuation.

Year-to-date, Church & Dwight is down -11.48%. Yet, the company still trades at a price to earnings ratio of 26.33 while offering a 1.29% starting dividend yield. This is a company that is almost as expensive as the S&P 500, without the double-digit returns.

Over the past decade, Church & Dwight has delivered a 10-year average annual total return of 9.54%.

Additionally, the firm’s 5-year compound annual dividend growth rate is a lackluster 4.29%. On the flip side, the company does have a low payout ratio of just 33.87%.

So why am I reviewing a company that’s trading at tech stock valuations while delivering utility stock returns? Simple. For many years Church & Dwight was a reasonably priced business that delivered inflation-beating dividend growth.

In 2017, the company raised its dividend by 7%.

And in 2018, Church & Dwight hiked its payout by 14.5%.

The anemic dividend growth really began in 2019. And much of this slowdown is the result of Church & Dwight’s recent acquisition spree. The company purchased self-care brand Touchland earlier this year. And the company also bought Hero Cosmetics in 2022, as well as TheraBreath in 2021.

While I’m not a big fan of the firm’s slow dividend growth and high valuation, Church & Dwight is selling off right now. And if this stock came down another 20%, something that actually happened in 2022 on news of the Hero Cosmetics acquisition, I’d certainly consider buying.

Until then, this company will remain on the watchlist.

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Disclaimer: This article is for entertainment purposes only. It is not financial advice, always do your own research.