Church & Dwight (CHD) – A Dividend Aristocrat

CHD – A Dividend Aristocrat – Introduction

On April 29, 2021, Church & Dwight Co., Inc. (CHD) held its Q1 earnings call. On this analyst call, management indicated the 44.5% gross margin was a 120 bps decrease from Q1 2020. Although CHD is a Dividend Aristocrat facing input pricing headwinds, market conditions are such that CHD’s valuation does not appear to reflect these challenges. With the recent release of quarterly results and FY2021 guidance, I now take this opportunity to determine whether to acquire additional shares of this Dividend Aristocrat.

A Dividend Aristocrat is a component of the S&P 500 Index with at least 25 consecutive years of dividend increases. Although CHD has paid a regular consecutive quarterly dividend for 120 years, and is one of the few stocks paying a dividend for 100+ years, it was not until recently that it became a Dividend Aristocrat. On January 29, 2021, CHD announced an increase in its quarterly dividend thus marking the 25th consecutive year in which it has increased the dividend.

Church & Dwight (CHD) - A Dividend Aristocrat

My Experience As A Shareholder

I do not spend much time monitoring my holdings. Instead, I try to restrict my investments to high-quality companies so I do not NEED to monitor my holdings. Looking at my April 2021 holdings review, we see companies where you can ‘sleep well at night’; this list reflects CHD as my 3rd largest holding behind Visa (V) and Mastercard (MA).

In early 2005 I initiated a position in CHD shortly after acquiesced to my wife’s/daughter’s insistence that we add a cat as a member of our family. Our cat, as I quickly learned, goes through a lot of kitty litter; I found myself regularly going to our local Walmart to buy some. I tried a variety of kitty litters but found the inexpensive litter was inexpensive for a reason. Eventually, I settled on Arm & Hammer kitty litter. Amazingly, CHD makes a variety of kitty litter!

After speaking with members of the Walmart staff and observing the extent to which Arm & Hammer kitty litter was turning over, I analyzed CHD as a potential investment. Much to my pleasant surprise, CHD’s had Trojan condoms, Nair, 1st Response, and Xtra laundry detergent in its arsenal of products. I was familiar with the Trojan and Xtra brands and liked that these were all non-reusable products. I like these types of products because it means consumers need to keep purchasing them. Based on my analysis I initiated a position and have never regretted this investment. In fact, I have reinvested the quarterly dividends and have periodically acquired additional shares.

The vast majority of my CHD holdings are in a retirement account for which I do not disclose details. Interestingly, the value of this holding has appreciated in excess of 5.7X my average cost. As recently as October 29, 2020, I acquired CHD shares for one of the ‘Core’ accounts that is a component of the FFJ Portfolio.

CHD – A Dividend Aristocrat – Business Overview

A comprehensive overview of the company and a host of risks and uncertainties, as well as other factors, that could have a material adverse impact on CHD’s business, reputation, financial results, financial condition and/or the trading price of the Common Stock is found in Part 1 – Items 1 and 1A of the 2020 10-K.

The April 29, 2021 Annual Shareholders’ Meeting presentation provides an overview of the company’s recent history and management game plan to grow the company.

Source: Church & Dwight Shareholder Meeting Presentation

Additional information about CHD and what lies ahead is found in the January 29, 2021 Analyst Day presentation.

CHD – A Dividend Aristocrat Financial Review

Q1 2021 Results

CHD’s Q1’s earnings release can be found here and the Q1 10-Q is available here.

On the Q1 earnings call, management indicates this Dividend Aristocrat is facing input pricing headwinds. The Texas freeze resulted in raw material shortages and exacerbated raw material and transportation costs. Management expects the tight supply and higher input costs to continue for the balance of the year. To mitigate the cost increases, price increases in CHD’s laundry products and across the international portfolio have been instituted. Couponing and promotional spending have also been reduced.

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Disclosure: Long CHD.

Disclaimer: Dividend Power is not a licensed or registered investment adviser or broker/dealer. We are not providing you with individual investment advice on this ...

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