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Avon Products (NYSE:AVP) has been troubled by regulatory problems since 2008. At that time, the company began an investigation into bribery rumors in connection with its operations in China. Those investigations were related to expenses for travel and entertainment, and it wasn't long before the net widened to other countries. Many have criticized the company for being slow and cumbersome in its approach to investigating the wrongdoings, and lax in its punishment of employees responsible.

Shares took a 50% hit when the problems first came to light, and since then have drifted lower. The last big leg of the decline occurred in October/ November of last year, when the SEC announced it was to probe Avon's contact with analysts in 2010 and 2011. From $24 before this announcement, the stock fell to a low of $16.09 in mid November.

With the latest announcements by the company, and possibly prompted by the SEC investigation, the board may finally be getting its act together and tackling its problems.

On Tuesday 31 January, CFO Charles W. Cramb was fired. The reason? Connection to the company's probe into possible violations of the Foreign Corrupt Practices Act.

In December, the company announced that its CEO, Andrea Jung would be stepping down. During her tenure, the company's earnings have turned volatile, the probe by the SEC has started, and internal investigations into bribery and other wrongdoing have struggled on. Jung, like most of the board, has been an incumbent director for a decade.

Perhaps the final straw was the announcement in late October that earnings had remained flat year on year, while sales in China had fallen. Market consensus had been for third quarter earnings of $0.46 per share.

The company will be reporting its fourth quarter numbers on Valentine's day, and may show a further slip in profits. However, at the time of writing the mean forecast is for $0.51 per share. Moving forward, the market expects earnings for next year around $1.72, a shade down from this year's expected final figure of $1.76.

Avon paid a dividend of $0.92 over the last year. That's a very healthy 5.20% yield at the current share price of around $18. It has increased this dividend for 20 years consecutively.

While its debt position is a cause for some concern (its debt/ equity ratio is 176 with total debt of $3.25 billion offset by cash of $1.01 billion), its revenue of over $11 billion produces operating cash flow of nearly $600 million.

Under a cloud of uncertain earnings and continuing regulatory problems, many investors-- perhaps quite rightly-- would avoid the shares until a more positive situation evolved. However, now may be the time to step in and start to build a holding.

Its dividend could be cut by an incoming CEO seeking to turn the company around, but for now, it seems safe. The company has a history of rewarding shareholders through its dividend policy. I feel it is more likely that the company will act with caution and hold the dividend rather than cut it.

The company is a household name -- literally. Its workforce consists mostly of door to door female salespersons. Buyers of its products are mostly not concerned by the vagaries of the stock market or share price fluctuations. Revenue of over $11 billion is hard to resist. With a return on equity of over 40%, and an operating margin of 11.26%, it looks attractive on this basis also, though its debt position needs to be tackled.

Perhaps prompted by SEC involvement, the company's board are finally tackling their problems and taking tough action: firing long serving colleagues is never easy.

Sometimes an investor has to be brave and go against the grain. This could be one of those times to add a speculative holding to a portfolio, and Josh Strauss at Appleseed, the fund that focuses on companies on companies with prudent and sustainable business models agrees. Ding dong, Avon's calling. I strongly believe this stock as a buy right now.

Source: Ding Dong, Avon's Calling: Why This Contrarian Value Idea Is A Buy Right Now