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I am not an investment professional and I cannot devote the time and energy necessary to study all the information available about each company I am considering to try to figure out which is a good investment. Instead I have adopted my own K.I.S.S investing method (Keep It Simple, Stupid). Here's a summary of my criteria:

  1. I start with the dividend history. I look to David Fish's list of Dividend Challenger's, Contenders and Champions. Any company I consider must have been increasing dividends for at least the past 5 years, preferably 10 or more, and I would like a 5- and 10-year dividend growth rate of over 10%. The payout ratio should be below 60%.
  2. In terms of earnings, I am looking for a company with steady earnings growth, year after year. It does not have to be double-digit growth every year, but it has to be a steady uptrend. I will accept a down year or two (out of the past 10), only if the following year the up trend continues.
  3. I check the company's S&P rating, looking for a ranking of 4 or 5 stars.
  4. I look at the F.A.S.T. Graph to see if the stock appears to be over or under valued based on the earnings, and if it confirms a steady up trend in those earnings.

Once I have bought a stock I have only two criteria for deciding whether or not to sell it. If the company freezes or cuts its dividend I will sell it. Also, if the company becomes too large a percentage of my portfolio I will sell some of it to maintain balance and diversity. Otherwise, as long the company continues to raise its dividend year after year, I will continue to hold it.

When I rebalance I look to put more funds into stocks in my portfolio that seem to be undervalued. To determine this I calculate the Percentage Above the Average Yield (PAAY). If the stock has a yield that is higher than usual (for that stock) it is an indication to me that it is undervalued, and I will put more funds into it. I will also check the stock's F.A.S.T. Graph for confirmation.

Over the next few weeks I will be preparing for the rebalancing of my portfolio that I do at the beginning of each year. As I do this I am going to post articles showing how I analyze the companies in different industries and how I use this analysis to make my buying/selling/rebalancing decisions. I will also start posting a quarterly update to show how my KISS method is working.

My first group of stocks will be the consumer product stocks, Procter & Gamble (PG), Colgate-Palmolive (CL), Kimberly-Clark (KMB), Church and Dwight (CHD) and Clorox (CLX). All of these stocks appear in David Fish's CCC list.

Procter & Gamble

Excerpts from the S&P report on PG

Corporate Overview Procter & Gamble's business is focused on providing branded products of what it considers superior quality and value to improve the lives of the world's consumers. The company has 25 brands that generate over $1 billion in sales, including Olay, Pantene, Braun, Gillette, Crest, Oral-B, Vicks, Dawn, Downy, Duracell, Febreze, Tide, Bounty, Charmin and Pampers.

Outlook We estimate that FY 13 (Jun.) sales will fall be flat with the $83.7 billion reported in FY 12 (from continuing operations), as unfavorable currency translation more than offsets the impact of higher prices. We project organic sales growth, excluding currency, acquisitions and divestitures, of 3%. For FY 13, we estimate EPS ex-items of $3.95, compared with $3.85 (from continuing operations) in FY 12.

Let's look at the earnings and dividend history:

Earnings and Dividend History
Per Share Data 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003
Earnings 3.12 3.93 3.53 3.58 3.64 3.04 2.64 2.66 2.32 1.85
Dividends 2.14 1.97 1.8 1.64 1.45 1.28 1.15 1.03 .93 .82
Payout Ratio(%) 68 50 41 46 40 42 44 39 40 44

Earnings The earnings have moved higher over the past 10 years, but it has not been a constant increase year after year. Earnings dropped in 2006, 2009, 2010 and 2012. That is three out of the last four years! Up until the past four years PG had a good trend, but with the recent performance it no longer meets my earnings requirement. (FAIL)

Dividend PG has raised its dividend every year for the past 56 years, has an average 5-year growth rate of 11.2%; A 10-year growth rate of 10.9%. The payout ratio had consistently been below 50%, but in the past three years the ratio has increased up to 68%. This may be a sign that the dividend is at risk to be frozen or decreased. I think this is very unlikely, but it is still not the kind of trend I am looking for. (FAIL)

S&P Rating PG has a rating from S&P of 3 stars (out of five). I look for stocks that are rated either 4 or 5 stars. The S&P website shows that stocks with a rating of 4 or 5 stars significantly outperform stocks rated 3 stars or lower. (FAIL)

F.A.S.T. Graph PG's F.A.S.T. graph shows that the current stock price is above the level that would be predicted by its earnings growth (the orange line). This is an indication that PG may be overvalued at the current time. (FAIL)

PAAY At the current time PG's yield is right about where its 13-week average yield is, so based on PAAY it is fairly valued. A yield that is well above its 13-week average yield is an indication that the stock is undervalued.

Procter & Gamble fails all four of my buy criteria so, to me, PG is NOT A BUY. However, I already own PG in my portfolio, and since the dividend continues to go up, I will continue to hold it. Since it appears to be over valued at the current time I will not be adding any more shares to my position

Colgate-Palmolive

Excerpts from the S&P report for CL

Corporate Overview Colgate-Palmolive Co. is a leading global consumer products company that operates in the oral, personal and household care and pet food markets. Its products are marketed in more than 200 countries and territories worldwide. The company's Oral, Personal and Home Care segment accounted for 87% of CL's total worldwide sales in 2011. The balance of revenues was derived from the Pet Foods segment. The company's oral care products include toothbrushes, toothpaste and pharmaceutical products for oral health professionals. CL's personal care products include bar and liquid soaps, shampoos, conditioners, deodorants, antiperspirants, and shave products. The home care business produces major brands such as Palmolive and Ajax soaps.

Outlook In 2012, we look for sales to increase about 2%, to $17.1 billion, from the $16.7 billion reported for 2011. We forecast organic sales growth of 6% (excluding currency, acquisitions and divestitures), with the strongest increases to be realized in emerging markets in Latin America and Asia/Africa, modest growth in North America, and slight declines in Europe. For 2013, we look for about 6% sales growth. We estimate 2012 EPS of $5.36, up 7% from $5.03 in 2011, excluding the negative impact from business realignment costs and other onetime items. Excluding the impact of currency, we estimate EPS growth of about 11%. We expect ongoing share repurchases to account for about 2 percentage points of the EPS growth in 2012. For 2013, we expect 12% EPS growth.

Let's look at the earnings and dividend history:

Earnings and Dividend History
Per Share Data 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003
Earnings 4.94 4.31 4.37 3.66 3.2 2.46 2.43 2.33 2.46 2.19
Dividends 2.27 2.03 1.72 1.56 1.4 1.25 1.11 .96 .90 .72
Payout ratio(%) 46 47 39 43 44 51 46 41 37 33

Earnings The earnings have consistently moved higher over the past 10 years. There was a slight drop in 2010, but that was quickly corrected in 2011. 2012 earnings are expected to be about $5.36, about a 7%-8% increase. Over all, as seen in the FAST graph, CL has a steady uptrend in earnings. (PASS)

Dividend CL has raised its dividend every year for the past 35 years, has an average 5 year growth rate of 12.7% and a 10 year average of 12.9%. The payout ratio has consistently been below 51%. (PASS)

S&P Rating CL has a rating from S&P of 4 stars (out of five). I look for stocks that are rated either 4 or 5 stars. The S&P website shows that stocks with a rating of 4 or 5 stars significantly outperform stocks rated 3 stars or lower. (PASS)

F.A.S.T. Graph CL's F.A.S.T. graph shows that the current stock price is above the level which would be predicted by its earnings growth (the orange line). This is an indication that CL is overvalued at this time. (FAIL)

PAAY At the current time CL's yield is right in line with its 13 week average. A yield that is well above it's average yield would indicate that CL is undervalued. This is not the case, so it confirms that CL is fairly valued or somewhat overvalued

Colgate-Palmolive passes only 3 of my four buy criteria, so, to me CL is NOT A BUY. I do not own CL and I will not be adding it to my portfolio. However, if the price drops to where it is more fairly valued I may reconsider.

Kimberly-Clark

Excerpts from the S&P report about KMB

Corporate Overview Kimberly-Clark, best known for brands such as Kleenex, Scott, Huggies and Kotex, sells consumer and other products in more than 150 countries.

Outlook In 2012, we look for sales to increase about 1% from the $20.8 billion reported for 2011, with the impact of divestitures and a stronger U.S. dollar partially offsetting our organic growth forecast of 4%. For 2013, we look for 1% sales growth, including the impact of exiting the European diaper business. Before special items, we estimate 2012 EPS of $5.18, an 8% increase from $4.80 in 2011. For 2013, we forecast EPS of $5.50, a 6% increase.

Let's look at the earnings and dividend history:

Earnings and Dividend History
Per Share Data 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002
Earnings 3.99 4.45 4.52 4.06 4.09 3.25 3.31 3.55 3.33 3.24
Dividends 2.76 2.58 2.4 2.32 2.12 1.96 1.8 1.6 1.36 1.2
Payout ratio(%) 69 58 53 57 52 60 54 45 41 37

Earnings The earnings for KMB have been inconsistent. There is a general uptrend, but it has been slow and with many down years. This is not the kind of earnings history I look for. (FAIL)

Dividend KMB has raised its dividend every year for the past 40 years. It has an average 5 year growth rate of only 7.8%, and a 10-year growth rate of 9.7%. The payout ratio is often in the 50%-60% range, and this past year it rose to 69%. The dividend growth rate is lower then I look for and the payout ratio is higher then I like to see. (FAIL)

S&P Rating KMB has a rating from S&P of 3 stars (out of five). I look for stocks that are rated either 4 or 5 stars. The S&P website shows that stocks with a rating of 4 or 5 stars significantly outperform stocks rated 3 stars or lower. (FAIL)

F.A.S.T. Graph KMB's F.A.S.T. graph shows that the current stock price is above the level which would be predicted by its earnings growth (the orange line). This is an indication that KMB is overvalued. (FAIL)

PAAY KMB fails all other criteria so there is no reason to calculate its PAAY.

Kimberly-Clark fails all four of my criteria, so, to me KMB is NOT A BUY. I do not own KMB and I will not be adding it to my portfolio.

Church and Dwight

Excerpts from the S&P report about CHD

Corporate Overview Church & Dwight was founded in 1846 as a marketer of sodium bicarbonate (more commonly known as baking soda) for use in home baking. Today, CHD's business is divided into three primary segments: Consumer Domestic (72% of sales in 2011); Consumer International (19%); and Specialty Products (9%). The household products unit (47% of total sales in 2011) makes and sells baking soda, laundry detergents, carpet and room deodorizers, cat litter, and other pet products. Major brand names include Arm & Hammer, Delicare, Oxiclean, and Orange Glo. The personal care unit (25%) markets toothpaste, toothbrushes, deodorants & antiperspirants, condoms, depilatories and pregnancy/ovulation test kits, among other products. Major brand names include Arm & Hammer, Spinbrush, Mentadent, Aim, Pepsodent, Close-Up, Arrid, Trojan, First Response and Nair.

Outlook We see sales growth of 6.2% in 2012 from the $2.75 billion in 2011. For 2013, we project 11% year-over-year growth. After a 2% reduction in share count from repurchases, we see 2012 EPS of $2.43, up 10% from $2.21 in 2011, which excludes a fourth-quarter $0.09 tax-related charge. For 2013, we project EPS of $2.79, up 15% from 2012.

Let's look at the earnings and dividend history:

Earnings and Dividend History
Per Share Data 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002
Earnings 2.12 1.88 1.71 1.39 1.23 1.04 .92 .68 .64 .53
Dividends .68 .31 .23 .17 .15 .13 .12 .115 .105 .10
Payout Ratio(%) 32 17 13 12 12 13 13 17 16 19

Earnings The earnings for CHD have been excellent! There has been a strong and steady uptrend for many years. This is exactly the kind of earnings history I look for. (PASS)

Dividend CHD has raised its dividend every year for the past 16 years. It has an average 5-year growth rate of 39.2%, and a 10-year growth rate of 21.8%. The payout ratio has been well below 60% for many years. (PASS)

S&P Rating CHD has a rating from S&P of 4 stars (out of five). I look for stocks that are rated either 4 or 5 stars. The S&P website shows that stocks with a rating of 4 or 5 stars significantly outperform stocks rated 3 stars or lower. (PASS)

F.A.S.T. Graph CHD's F.A.S.T. graph shows that the current stock price is above the level, which would be predicted by its earnings growth (the orange line). This is an indication that CHD is overvalued at the present time. (FAIL)

PAAY At the present time CHD's yield is right in line with its 13-week average yield. A yield that is well above its average yield would indicate that the stock is undervalued. This is not the case, so it confirms that CHD is fairly valued, or somewhat overvalued..

Church & Dwight passes only 3 of my four buy criteria, so, to me CHD is NOT A BUY. I do not own CHD and I will not be adding it to my portfolio. However, I will continue to follow it and if the price falls to a level where it is more fairly valued I may reconsider buying it.

Clorox

Excerpts from the S&P report about CLX

Corporate Overview Clorox's products are manufactured in more than two dozen countries and marketed in more than 100 countries. The Cleaning segment consists of laundry, home-care and professional products marketed and sold in the United States. Products comprise laundry additives, including bleaches under the Clorox brand and Clorox 2 stain fighter and color booster; home-care products, primarily under the Clorox, Formula 409, LiquidPlumr, Pine-Sol, S.O.S and Tilex brands; and natural cleaning and laundry products under the Green Works brand. The Household segment consists of charcoal, cat litter and plastic bags, wraps and container products marketed and sold in the United States. Products include plastic bags, wraps and containers under the Glad brand; cat litter products under the Fresh Step, Scoop Away and Ever Clean brands; and charcoal products under the Kingsford and Match Light brands. The Lifestyle segment consists of food products, water filtration systems and filters marketed and sold in the United States, and natural personal care products. Products include dressings and sauces, primarily under the Hidden Valley and K C Masterpiece brands; water-filtration systems and filters under the Brita brand; and natural personal care products under the Burt's Bees brand.

Outlook For FY 13 (Jun.), we look for sales to increase 2.4% to $5.60 billion, from the $5.47 billion reported for FY 12, driven primarily by the introduction of new products throughout CLX's portfolio. With some benefit from a 2% reduction in share count given repurchases, we estimate FY 13 EPS of $4.30, up 5% from $4.10 in FY 12. For FY14, we estimate EPS of $4.60, reflecting 7% growth.

Let's look at the earnings and dividend history:

Earnings and Dividend History
Per Share Data 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003
Earnings 4.1 2.07 4.24 3.81 3.25 3.22 2.89 2.88 2.55 2.33
Dividends 2.4 2.2 2.0 1.84 1.6 1.2 1.14 1.1 1.08 .88
Payout ratio 59 106 47 48 49 37 39 38 42 38

Earnings Except for a large drop in 2011 the earnings for CLX have shown a steady uptrend. This one time drop was partially due to a large goodwill write-off. The earnings rebounded in 2012, and are expected to continue to increase over the next two years. With only one down year for earnings CLX's earnings history is acceptable. (PASS)

Dividend CLX has raised its dividend every year for the past 35 years. It has an average 5-year growth rate of 14.7%, and a 10-year growth rate of 10.6%. The payout ratio is usually below 60%. The one year it was not was in 2011 due to a one-time drop in earnings. It immediately dropped back down below 60%. (PASS)

S&P Rating CLX has a rating from S&P of 3 stars (out of five). I look for stocks that are rated either 4 or 5 stars. The S&P website shows that stocks with a rating of 4 or 5 stars significantly outperform stocks rated 3 stars or lower. (FAIL)

F.A.S.T. Graph CLX's F.A.S.T. graph shows that the current stock price is above the level that would be predicted by its earnings growth (the orange line). This is an indication that CLX is overvalued. (FAIL)

PAAY CLX fails 2 out of my 4 criteria, so there is no reason to calculate its PAAY.

Clorox fails 2 out of my 4 criteria, so to me CLX is NOT A BUY. I do not own CLX and I will not be adding it to my portfolio.

Summary: Of these five consumer product stocks only CL and CHD come close to meeting all my criteria. Both seem to be a little over valued right now, but I will keep them on my radar screen and consider buying them if the price dips somewhat. PG also does not meet my criteria, but since it is already in my portfolio, and continues to raise its dividend, I will continue to hold it.

All this information was obtained from S&P, David Fish's CCC list, and F.A.S.T. graphs. It is very easy to find, is inexpensive, and it only takes about five minutes to do the evaluation. I calculate the PAAY myself, and once the spreadsheet is set up it only takes a few minutes to do using data from Yahoo Finance. By following these criteria I believe I will produce a very strong portfolio of solid DGI stocks that will serve me well over the next 10-20 years.

Thank you for reading my article. I welcome your comments.

Source: K.I.S.S. Dividend Analysis: 5 Consumer Products Stocks

Additional disclosure: I am not an investment professional and nothing I am saying in this article should be construed as advice for anybody. I am simply discussing my KISS investment method and how I use it for stock selection. Before buying or selling any stock readers should do their own research and make their own decisions about investing.