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Summary

  • Colgate-Palmolive and Clorox are both long-term players in the Household & Personal Products industry.
  • Clorox offers a higher dividend yield and a more attractive price based on PE ratio.
  • Colgate-Palmolive has performed significantly better than Clorox in terms of price appreciation, as well as, dividend, revenue, and earnings growth.

Overview

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.

For this article, I will be taking a look at the Household & Personal Products sub industry which includes Clorox (NYSE:CLX) and Colgate-Palmolive (NYSE:CL).

Current Financials

CloroxColgate-Palmolive
Gross Profit Margin (quarterly)41.77%58.36%

Profit Margin (quarterly)

9.88%8.97%
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)20.73x29.40x
Earnings Yield (trailing twelve months)4.82%3.40%
Price to Book Value (trailing twelve months)216.61x38.36x
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.

CLX Chart

CLX data by YCharts

In terms of revenue, Colgate-Palmolive has seen more than double the growth of Clorox over the past ten years.

CLX Revenue (<a href=

CLX Revenue (NYSE:TTM) data by YCharts

Looking at earnings, the growth between the two companies has been more consistent, with Colgate-Palmolive performing just a bit better during this time.

CLX EPS Basic Chart

CLX EPS Basic (TTM) data by YCharts

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.

CLX Dividend Yield Chart

CLX Dividend Yield (TTM) data by YCharts

Both companies have similar payout ratios.

CLX Payout Ratio Chart

CLX Payout Ratio (TTM) data by YCharts

Future Outlook

Based on estimates configured by YCharts, Colgate-Palmolive appears to be positioned better for future sales growth in the near future.

CLX Sales Estimates for Current and Next 3 Quarters Chart

CLX Sales Estimates for Current and Next 3 Quarters data by YCharts

The same is also true for earnings.

CLX EPS Estimates for Current and Next 4 Quarters Chart

CLX EPS Estimates for Current and Next 4 Quarters data by YCharts

Conclusion

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.

CLX Dividend Chart

CLX Dividend data by YCharts

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.

Source: Colgate-Palmolive Or Clorox: Which Is The Better Long-Term Buy Right Now?