It's not the sexiest name, but Church & Dwight (NYSE:CHD) is one of the best gifts investors have gotten during the persistently volatile season. Is it too late to clean up with Church & Dwight?

Investopedia Markets: Explore the best one-stop source for financial news, quotes and insights.

Rock Solid Performance
Up about 30% year-to-date, Church & Dwight's consistently strong operating performance is enviable. EPS growth has been consistently over 10% for the past three years, according to Church & Dwight's CEO James Craigie. Operating margins have been rising for a number of years as well. The New Jersey-based manufacturer of popular household items, such as Arm & Hammer, Pepsodent and Trojan Condoms, reported net income of $79.6 million during the third quarter. Net sales grew to $701 million. Of note, Arm & Hammer and XTRA sales rose 10% year-over-year in dollar terms. Management anticipates sturdy organic sales growth in the Q4, and synergies may come online soon due to new plant openings.

Years of dependable operating performance have resulted in an excellent balance sheet featuring great cash flow - enough to retire all of Church & Dwight's debt, in fact. Expect a boost in the dividend yield, and augmentation of the $300 million buyback that is in place, using some of that cash flow. Church & Dwight already doubled its dividend in February 2011, and another hike might be just around the corner as the company targets a 2% yield. On a relative basis, Church & Dwight's yield isn't competitive compared against Procter & Gamble (NYSE:PG), Colgate-Palmolive (NYSE:CL) or Clorox (NYSE:CLX). What Church & Dwight lacks in yield (1.5%), it more than makes up for with stable capital appreciation potential. (To learn more about yields, read Investment Valuation Ratios: Dividend Yield.)

Best of a Good Group?
On top of the stellar yearly gain, Church & Dwight's long-term price chart looks like a staircase. The trend should continue. Highly volatile markets are increasingly pushing investors to a defensive sector rotation strategy. The Consumer Staples Select Sector SPDR (ARCA:XLP) is the top-performing group over the past month. Furthermore, the sector trails only utilities for the year. If Europe continues to rattle markets, Staples' low-risk premium will keep drawing interest.

Church & Dwight's operating performance separates it from the pack. The sluggish pace of economic growth and rise in raw material prices seem to be impacting the competition to a slightly greater extent. Procter & Gamble's net income slipped 2% last quarter as price increases led to lower volumes and lost market share. Kleenex and Huggies diapers seller Kimberly Clark (NYSE:KMB) recently downgraded its sales growth target as consumers trade down. Colgate-Palmolive indicated that 2011 gross margins will be squeezed more than previously expected, although sales did climb 11% last quarter. Despite economic headwinds, these companies still boast outstanding brands and attractive yields that investors want.

The Bottom Line
Church & Dwight simply appears to be the best of the group right now. Of course, there are risks to be aware of. Stagnating global growth and higher input costs - oil in particular - pose serious threats. On the other hand, if the risk on trade re-emerges, the staples sector would be left in the dust.

Yet it seems like broad market volatility is one thing investors can count on for the foreseeable future. Church & Dwight can capture alpha from its position of stability. Currently trading around $45, Church & Dwight's stock is in a consolidation pattern at the top of a longer uptrend. If the stock breaks away from the current channel and surmounts the $45 resistance level, the next test will be the 52-week high of $46.29. (For related reading, see Analyzing Chart Patterns.)

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

At the time of writing, Matt Cavallaro did not own shares in any of the companies mentioned in this article.

Related Articles
  1. Chart Advisor

    3 Ways to Trade the Rising Volatility

    With volatility increasing in the markets, many are turning to these three volatility-capturing exchange-traded products.
  2. Mutual Funds & ETFs

    ETF Analysis: iShares US Basic Materials

    Learn about the iShares US Basic Materials exchange-traded fund, which invests in the equities of chemicals, metals and industrial gas companies.
  3. Mutual Funds & ETFs

    ETF Analysis: Ultra Oil & Gas

    Find out more about the ProShares Ultra Oil & Gas exchange-traded fund, the characteristics of the ETF and the suitability and recommendations for the fund.
  4. Mutual Funds & ETFs

    ETF Analysis: PowerShares DB Commodity Tracking

    Find out about the PowerShares DB Commodity Tracking ETF, and explore a detailed analysis of the fund that tracks 14 distinct commodities using futures contracts.
  5. Mutual Funds & ETFs

    ETF Analysis: PowerShares FTSE RAFI US 1000

    Find out about the PowerShares FTSE RAFI U.S. 1000 ETF, and explore detailed analysis of the fund that invests in undervalued stocks.
  6. Mutual Funds & ETFs

    Comparing ETFs Vs. Mutual Funds For Tax Efficiency

    Explore a comparison of mutual funds and exchange-traded funds, or ETFs, and learn what makes ETFs a significantly more tax-efficient investment.
  7. Mutual Funds & ETFs

    ETF Analysis: Vanguard Small-Cap Value

    Find out about the Vanguard Small-Cap Value ETF, and explore detailed analysis of its characteristics, suitability, recommendations and historical statistics.
  8. Mutual Funds & ETFs

    ETF Analysis: Vanguard Intermediate-Term Corp Bd

    Learn about the Vanguard Intermediate-Term Corporate Bond ETF, and explore detailed analysis of the fund's characteristics, risks and historical statistics.
  9. Insurance

    Whole or Term Life Insurance: Which Is Better?

    Learn the difference between term life insurance and whole life insurance. Understand when it is beneficial to buy each type of life insurance.
  10. Mutual Funds & ETFs

    ETF Analysis: iShares 10-20 Year Treasury Bond

    Learn about the iShares 1-20 Year Treasury Bond ETF and its holdings, and understand why investors may be better served to look at other bond funds.
RELATED TERMS
  1. Equity

    The value of an asset less the value of all liabilities on that ...
  2. Exchange-Traded Fund (ETF)

    A security that tracks an index, a commodity or a basket of assets ...
  3. Fast Fashion

    Definition of "fast fashion."
  4. Exchange-Traded Mutual Funds (ETMF)

    Investopedia explains the definition of exchange-traded mutual ...
  5. Hard-To-Sell Asset

    An asset that is extremely difficult to dispose of either due ...
  6. Sucker Yield

    When an investor has essentially risked all of his capital for ...
RELATED FAQS
  1. How do dividends affect retained earnings?

    When a company issues a cash dividend to its shareholders, the retained earnings listed on the balance sheet are reduced ... Read Full Answer >>
  2. What is the difference between called-up share capital and paid-up share capital?

    The difference between called-up share capital and paid-up share capital is investors have already paid in full for paid-up ... Read Full Answer >>
  3. Why would a corporation issue convertible bonds?

    A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion ... Read Full Answer >>
  4. What does a high turnover ratio signify for an investment fund?

    If an investment fund has a high turnover ratio, it indicates it replaces most or all of its holdings over a one-year period. ... Read Full Answer >>
  5. Does index trading increase market vulnerability?

    The rise of index trading may increase the overall vulnerability of the stock market due to increased correlations between ... Read Full Answer >>
  6. How does additional paid in capital affect retained earnings?

    Both additional paid-in capital and retained earnings are entries under the shareholders' equity section of a company's balance ... Read Full Answer >>

You May Also Like

COMPANIES IN THIS ARTICLE
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!