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Yield Not Right for Church & Dwight

Church & Dwight (NYSE: CHD  ) reported robust earnings for its third quarter this week, but alas, its yield didn't keep up.

Total net sales increased 17% to $518.6 million. The growth in the top-line number includes the effect of a few acquisitions, including a Brazilian skin-care business. Excluding acquisitions and currency influence, net sales advanced only 2.5%. Operating income jumped 28% to $68.9 million. Adjusting that for a litigation issue in the previous year's quarter, as well as current stock option expenses, operating income went up 18%. Net income came in at $38.7 million, or $0.57 per diluted share, vs. $34.6 million, or $0.51 per diluted share, reported one year ago.

Like all consumer companies, including Procter & Gamble (NYSE: PG  ) , Clorox (NYSE: CLX  ) , Colgate-Palmolive (NYSE: CL  ) , and Kimberly Clark (NYSE: KMB  ) , Church & Dwight has been fighting the good fight against inflationary pressures. The company stated that price increases have been enacted during the year on some product categories, which hampered volume growth in the second quarter. According to CEO James R. Craggier, things improved on that front in the past three months, especially for liquid laundry detergent. That's good news, since the company wants to see the price increases absorbed as quickly as possible.

Church & Dwight has the powerful Arm & Hammer brand in its portfolio, along with other familiar products such as Arid antiperspirants and Trojan condoms. As such, it's a typical Peter Lynch business -- a company that a prospective investor knows and buys from. And it has "long term" written all over it.

Dividend investors will take heart in Church & Dwight's proud proclamations that its latest quarterly payment of $0.07 per share is its 423rd consecutive payout. Here's where my complaint about the stock comes in -- while Church & Dwight might be an interesting idea for a core holding in a portfolio, its stock is certainly not yielding enough at this time for me to be compelled to execute further due diligence on it. A yield of 0.7% is just too minimal.

I had a similar issue with Playtex Products (NYSE: PYX  ) . As I stated in an article on its latest earnings information, the company doesn't captivate me, because it completely lacks a quarterly payment. Sure, Church & Dwight might beat Playtex on that count, since it does offer a bit of a yield, but why even bother when there are blue chips like P&G and Johnson & Johnson (NYSE: JNJ  ) around? The latter two companies currently offer yields of 1.9% and 2.2%, respectively.

So there you have it. Church & Dwight had an OK quarter, backed by its large portfolio of brands. It's standing up against commodity costs in an able manner, and it has grown margins. But the yield just isn't there for me. If the stock price drops from near the high end of its 52-week range, and its yield becomes more value-oriented, I'll take a look.

Check out some more consumer-oriented Foolishness:

Johnson & Johnson is aMotley Fool Income Investorrecommendation, while Colgate-Palmolive is a selection of theInside Valuenewsletter.

Fool contributor Steven Mallas owns none of the companies mentioned. As of this writing, he was ranked 1,485 out of 12,354 investors in the CAPS system. Don't know what CAPS is? Check it out. The Fool has a disclosure policy.

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10/21/2016 4:01 PM
CHD $47.51 Up +0.02 +0.04%
Church and Dwight CAPS Rating: ***
CL $70.92 Down +0.00 +0.00%
Colgate-Palmolive CAPS Rating: ****
CLX $120.05 Up +0.34 +0.28%
The Clorox Company CAPS Rating: ****
JNJ $113.44 Down -1.43 -1.24%
Johnson and Johnso… CAPS Rating: ****
KMB $119.58 Up +0.41 +0.34%
Kimberly-Clark CAPS Rating: ****
PG $84.33 Down -0.60 -0.71%
Procter and Gamble CAPS Rating: ****