Church & Dwight & an Insufficient Yield

Consumer-products company Church & Dwight (NYSE: CHD  ) is glowing orange today.

The company reported second-quarter earnings yesterday and saw a nice sales surge from the Orange Glo acquisition that it completed last year. That move added a well-known name to a roster that already included the likes of Arm & Hammer and Trojan. Net revenue for the quarter rose 19% to $546.5 million. Without the benefit of the Orange Glo purchase, as well as the positive effect of the weak dollar, organic growth would have been 5%.

Earnings per diluted share didn't rocket too high, but they did rise 9% to $0.54 per diluted share. That may not sound overly exciting, but it represents steady growth.

You might find the cash-flow statement more exciting, however. Net cash from operations for the quarter tripled to $45.5 million, and free cash flow increased more than seven times to $31.4 million. For the six-month period, Church & Dwight increased operational cash flow more than 160% to $75 million and boosted free cash flow by more than 570% to better than $49 million.

The company expects earnings per share to come in somewhere between $2.34 and $2.36, for double-digit growth of 13% to 14%.

Management seems confident in the future, because it just increased the quarterly dividend by 14% -- and indeed, the free cash generated over the years has been more than sufficient to cover the dividend obligation. Yet I have to express the same concern I had when I covered Church & Dwight last year -- I just don't think it offers a big enough yield for investors. Even with the dividend increase, the stock yields roughly 0.7% at today's prices. Companies such as Procter & Gamble (NYSE: PG  ) , Clorox (NYSE: CLX  ) , Kimberly Clark (NYSE: KMB  ) , and WD-40 (NYSE: WDFC  ) all have higher yields than that.  

If the market could see fit to knock the price down on Church & Dwight's stock far enough to create a better yield situation, then I would definitely take a look, because I do believe it is a long-term winner. After all, it distributes great consumer products, and its stock has done well over the years. But for now, I'd be more inclined to watch the shares than buy them.

More Foolish articles involving Church & Dwight:

Do you love dividends? You should, because they will make you rich over time. James Early, lead analyst of Motley Fool Income Investor, loves to find stocks with good yields. Oh, and he's beating the market, too. Sign up for a free, no-risk trial to check out his winning portfolio.

Fool contributor Steven Mallas owns none of the companies mentioned. As of this writing, he was ranked 8,249 out of more than 60,000 investors in Motley Fool CAPS. Don't know what CAPS is? Check it out. The Fool has a disclosure policy.


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