Last update on 2024-06-27

Church & Dwight (CHD) - Dividend Analysis (Final Score: 7/8)

Analyze the robust dividend policy of Church & Dwight (CHD) with a final score of 7/8 according to an 8-criteria system. Insights on stability and growth.

Short Analysis - Dividend Score: 7

We're running Church & Dwight (CHD) against the 8-criteria scoring system to evaluate the performance and stability of a company's dividend policy.

Church & Dwight (CHD) shows a very stable and strong dividend policy based on an 8-criteria scoring system. They scored 7 out of 8, demonstrating consistent growth and prudent management. Though their dividend yield of 1.1548% is below the industry average of 1.82%, this is partly due to their substantial stock price appreciation over the years. They have an impressive average annual dividend growth rate of 17.75%, far exceeding the 5% benchmark, despite some volatility. Their average payout ratio of 29.04% is well below the 65% threshold, indicating they retain sufficient earnings for reinvestment. Both earnings and free cash flow have consistently covered their dividends, showing strong financial health. Moreover, they've paid stable and increasing dividends for over 20 years. CHD also has a solid history of stock repurchases, adding further value for shareholders. However, any significant past drops in dividends were not located in the data.

Insights for Value Investors Seeking Stable Income

Based on the analysis, CHD appears to be a good option for investors looking for long-term stable dividends with potential for capital growth. Despite the lower than average dividend yield, its high dividend growth rate and low payout ratio indicate strong and sustainable dividend payments. The company's long track record of paying dividends and consistent stock repurchases add to its appeal. If you're looking for a reliable dividend-paying stock with a solid potential for appreciation, CHD is worth considering.

For those who are interested in delving deeper into the specifics, the subsequent section provides a comprehensive exploration of the criteria.

Dividend Yield Higher than the Industry Average?

Dividend yield represents the dividend income as a percentage of the stock price. A higher yield often indicates a more favorable investment.

Church & Dwight's (CHD) latest dividend yield at 1.1548% is below the industry average of 1.82%. Historically, CHD's dividend yield has fluctuated between 0.55% and 1.79% over the past two decades. While a yield lower than the industry average isn't necessarily bad, it signals that CHD might not be the most attractive option for yield-focused investors. Given the stock has appreciated significantly over the years – from $6.60 in 2003 to $94.56 in 2023, a lower yield is partly due to the rapid price increase relative to the dividend growth, signaling potential capital appreciation rather than income.

Average annual Growth Rate higher than 5% in the last 20 years?

Criterion 1.1 assesses whether the Dividend Growth Rate is higher than 5% over the last 20 years. This figure serves as a benchmark for sustainable dividend increases, indicating the company’s ability to enhance shareholder value over a long period.

The Dividend Growth Rate data for Church & Dwight (CHD) indicates significant volatility over the last 20 years, with values ranging from as low as 3.4 to as high as 119.3548. The average dividend growth rate stands at approximately 17.75%, which is well above the 5% benchmark. Given this average, CHD has demonstrated a strong capacity for increasing its dividends over time. However, the volatility should be noted; extreme fluctuations can suggest underlying issues or extraordinary events impacting dividend policy. Despite this, maintaining an average growth rate significantly above 5% is a positive indicator for long-term dividend growth.

Average annual Payout Ratio lower than 65% in the last 20 years?

Average payout ratio in the context of dividend analysis, particularly when assessing a company's payout ratio over a 20-year span, and its importance.

The average payout ratio over the last 20 years for Church & Dwight (CHD) stands at approximately 29.04%. This is significantly below the 65% threshold, indicating a prudently managed dividend strategy. This trend is important as it suggests CHD has consistently maintained ample room for reinvestment into the business, which is crucial for sustaining growth and weathering economic fluctuations. Lower payout ratios signify that dividends are being distributed without overstretching financial resources, reducing risks of dividend cuts during downturns. The provided data confirms that in no year did the payout ratio surpass the 65% mark, with the highest being 61.71% in 2022. Consequently, this trend is favorable for long-term dividend stability and business health.

Dividends Well Covered by Earnings?

Dividends are well covered by the earnings.

Assessing if dividends are well covered by earnings involves comparing the dividend payout ratio, which is the portion of earnings paid out as dividends to shareholders. Ideally, a company should have its earnings per share (EPS) significantly higher than dividends per share (DPS) to ensure it has sufficient profits to cover the dividends without jeopardizing its financial stability.

Dividends Well Covered by Cash Flow?

Dividends Well Covered by Cash Flow refers to the ability of a company to pay its dividends solely from its free cash flow, which measures the company's financial flexibility and sustainability of its dividend policy.

The free cash flow for Church & Dwight (CHD) shows a general increasing trend over the observed years, starting from $85.66 million in 2003 and reaching $807.1 million in 2023. Simultaneously, the dividend payout amount has also increased from $12.49 million to $266.5 million. The ratio of dividend payments covered by free cash flow started at 0.145 (or 14.586%) in 2003 and fluctuated before peaking at 0.360 (or 36.098%) in 2022. Although there have been fluctuations, the overall trend indicates an improvement in the coverage of dividends by free cash flow. This is good as it demonstrates that Church & Dwight has consistently maintained a level of free cash flow that is more than adequate to cover its dividend payments, reflecting the company's strong financial health and commitment to returning value to shareholders.

Stable Dividends Since the Company Began Paying Dividends?

Stable and consistent dividends over the past 20 years indicate the reliability of Church & Dwight (CHD) as a dividend-paying company and provide assurance to income-seeking investors. Businesses that can sustain or grow dividends reflect healthy financial practices and sound management.

Analyzing the dividend per share data for Church & Dwight (CHD) over the past 20 years, we observe fluctuations in the dividend payouts. The dividend per share has shown consistent growth from $0.0517 in 2003 to $1.092 in 2023. This consistency is crucial for long-term income-seeking investors as it demonstrates reliability and robustness in the company’s financial health. However, the provision that there was a year where the dividend dropped by 20% is crucial for this analysis. I could not locate a specific instance of a 20% drop in the provided data. Therefore, for this metric, CHD shows strength in its dividend stability which is beneficial for investors, assuming there are no hidden declines in the intervals not represented by given years.

Dividends Paid for Over 25 Years?

Explain the criterion for Church & Dwight (CHD) and why it is important to consider

Church & Dwight (CHD) has been consistently paying dividends since 1998, indicating a sustainable track record of returning capital to shareholders. This criterion is important because it reflects the company's financial stability and ability to generate consistent earnings. Continuous dividend payments over 25 years can be a sign of strong management and a resilient business model that can withstand economic fluctuations.

Reliable Stock Repurchases Over the Past 20 Years?

Reliable Stock Repurchases Over the Past 20 Years

The data shows that Church & Dwight (CHD) has engaged in consistent stock repurchases over the past 20 years, as evidenced by the decline in the number of shares outstanding from 253 million in 2003 to 244.9 million in 2023. Notably, during the stock repurchases in the years 2006, 2012, 2013, 2014, 2015, 2016, 2017, 2018, 2019, 2021, and 2022, there were notable decreases in shares. The average repurchase over this period amounts to a reduction of -0.1404 per annum. This trend is positive for dividend investors as repurchases can enhance earnings per share (EPS) and potentially provide additional value to shareholders.