3 Reasons to Buy Church & Dwight

In its latest earnings call, Church & Dwight CEO Jim Craigie made a great case for investing in his relatively small consumer goods company.

Apr 9, 2014 at 1:05PM

Any investor who took the time to read the latest conference call from Church & Dwight (NYSE:CHD) had to come away at least a little excited. The enthusiasm from management, particularly Executive Chairman and CEO James Craigie, was great to witness and should inspire confidence in investors regarding the future of the relatively small company.

Of particular interest were CEO Craigie's top reasons to be excited for the future of Church & Dwight. Together, the reasons form a compelling argument for investing in the small consumer goods company over larger competitors like Procter & Gamble (NYSE:PG).

Imglogo

Source: Church & Dwight. 

Craigie's top three
In the company's most recent investor's presentation, CEO Craigie laid out 10 reasons Church & Dwight can continue to deliver superior total shareholder returns compared to competitors going forward. The first three are especially worth considering since they pertain to overall brand strength.

The first reason is that Church & Dwight has a recession-proof portfolio thanks to its mix of both premium and value brands. The company breaks its product mix down to 55% premium and 45% value. For instance, the company's laundry detergent brands Ultra and Xtra offer consumers a 50%-65% discount to Procter & Gamble's Tide brand. Church & Dwight's fabric softeners are also marked 50% lower than Procter & Gamble's Bounce brand. So, in tough economic times, the company's value brands will shine. 

A second reason is that management at Church & Dwight is now focusing intensively on four main brands: ARM & HAMMER, OxiClean, Trojan, and the company's vitamin division, which includes Vitafusion and Lil' Critters.

Together, these brands have grown revenue over 50% since 2008 and currently represent approximately 60% of the company's total sales and profits. Therefore, they are vital to Church & Dwight's overall growth. With a more intense focus, management can better direct marketing efforts to what it refers to as its mega brands going forward. 

Some of management's stated benefits of focusing on only four brands are that advertisements become more cost-effective, there's greater licensing potential, money for research and development can be used more effectively, and the company can reduce organizational costs. 

A third reason to invest in Church & Dwight is that it continues to defend its brands and market share. Management has done this over the years through innovative new product introductions and increased advertisement spending.

For example, when Procter & Gamble attacked the laundry detergent market in 2009 with an aggressive marketing campaign for its Tide brand, Church & Dwight responded by strengthening its OxiClean brand. Through new product spinoffs, clever co-branding tactics and increased advertising, Church & Dwight actually grew the OxiClean brand's market share by 3% from 2009 to 2013. 

Superior growth
Also a highlight for CEO Craigie is Church & Dwight's stellar performance for shareholders over the last decade. CEO Craigie enthusiastically explained, "Look at the total shareholder return of this company over the past 10 years, which is my tenure as Chairman and CEO. I mean, I just want to stop at this slide for the next hour. But just look at this, 394% return since July of 2004, blows away anybody else in this industry, about 6 times the S&P 500." 

He then highlighted the company's impressive dividend achievements. The company has raised its dividend 10 times in the last 10 years at an average annual dividend growth rate of 30%. This compares favorably to Procter & Gamble, which has raised its dividend 10 times in the last decade as well, but at a substantially lower annual growth rate of 10.6%. 

Growth projections for Church & Dwight also beat out those of larger competitor PG. The company is projected to grow revenue 3.2% and EPS 9% in 2014 compared to PG's respective 1.1% and 4.2%.

Images

Source: Company Facebook.

Bottom line
It is not often that investors are presented with such enthusiasm from company management. However, Church & Dwight's CEO Jim Craigie has a lot to be excited about, as his company is currently firing on all cylinders and gaining ground on its larger competitors.

With a tighter focus on its four mega brands going forward, management at Church & Dwight appears set to increase the company's overall brand awareness among consumers and continue to outperform peers in the process.

Boost your 2014 returns with The Motley Fool's top stock
There’s a huge difference between a good stock and a stock that can make you rich. The Motley Fool's chief investment officer has selected his No. 1 stock for 2014, and it’s one of those stocks that could make you rich. You can find out which stock it is in the special free report "The Motley Fool's Top Stock for 2014." Just click here to access the report and find out the name of this under-the-radar company.

Philip Saglimbeni has no position in any stocks mentioned. The Motley Fool recommends Procter & Gamble. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of fool.com.

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to www.fool.com/beginners, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at www.fool.com/podcasts.

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.


Compare Brokers