Recently, I have been writing a series of articles related to The Best Dividend Growers. In each article, I take a look at a specific industry sector of the S&P 500 (based on GICS sub industry) and review the available stocks to determine which stock(s) out of the group are the best long-term options for income investors. You can see Part 1 here and the latest part (part 18) here.
For some of the GICS Sub Industries, there are only two to three stocks available, so instead of focusing on dividend growth, I have decided to just review the available stocks in these sub industries to determine whether they should be considered as possible buys for long-term investors. I recently did this for the Leisure Products GICS Sub Industry in reviewing Hasbro and Mattel.
|Gross Profit Margin (quarterly)||41.77%||58.36%|
Profit Margin (quarterly)
|Return on Assets (trailing twelve months)||13.04%||15.77%|
|Return on Equity (trailing twelve months)||485.50%||120.20%|
|PE ratio (trailing twelve months)||20.73x||29.40x|
|Earnings Yield (trailing twelve months)||4.82%||3.40%|
|Price to Book Value (trailing twelve months)||216.61x||38.36x|
|Revenue (trailing twelve months)||$5.63B||$17.43B|
|EPS (trailing twelve months)||$4.31||$2.32|
Based on the table above, both companies seem to be in good financial shape. Clorox appears to be overvalued based on price to book value, while Colgate-Palmolive appears overvalued based on PE ratio.
The Past Ten Years
Looking at the chart below, you can see that Clorox has performed nearly the same as the S&P 500 over the past ten years, while Colgate-Palmolive has performed significantly better.
In terms of revenue, Colgate-Palmolive has seen more than double the growth of Clorox over the past ten years.
Looking at earnings, the growth between the two companies has been more consistent, with Colgate-Palmolive performing just a bit better during this time.
In the table below, you can see that for the majority of the past ten years, Clorox has seen a higher dividend yield compared to Colgate-Palmolive.
Both companies have similar payout ratios.
Based on estimates configured by YCharts, Colgate-Palmolive appears to be positioned better for future sales growth in the near future.
The same is also true for earnings.
I feel that Colgate-Palmolive is currently better positioned to offer more significant returns to long-term investors compared to Clorox. While Colgate-Palmolive is currently less attractively priced based on trailing and forward PE, there is a reason for that.
Colgate-Palmolive has seen higher price returns, as well as, higher revenue and earnings growth. While Clorox does offer a higher yield than Colgate-Palmolive, Colgate-Palmolive has offered higher dividend growth over long periods of time.
With better historical revenue, earnings, and dividend growth along with better expected future growth compared to Clorox, I feel that the company's benefits strongly outweigh those of Clorox at the moment. As always, I suggest individual investors perform their own research before making any investment decisions.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.