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Can anyone explain to me why CL trades at such a high multiple? I'm just not understanding it. I know it has a huge streak of dividend increases and that it is a reliable dividend paying consumer staple. But other than that, the yield is not that exciting, the earnings have completely stalled, making little progress since about 2009, and the payout ratio has been climbing steadily to support the dividend increases.
So why is it trading at a p/e of 27, when so many other consumer staple dividend growth champs are trading in the 19-22 p/e range? Have I missed some news or some other differentiating factor? What gives?
Thanks.
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Thanks Eric, I appreciate the response. I also don't understand the $2.96 projection for 2104. Based on first two quarters, they are on pace to match 2013's $2.38 in earnings (using reported rather than "adjusted" numbers), not beat it by 24 percent.
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I too came up with a ttm P/E of 22 using GAAP reported earnings. Have no idea if there were any extraordinary items in there.
I think part of the slightly higher valuation over its peers (PG seeming to be the natural first pick as a rival) is because of a myriad reasons. 1.) CL, at first glance, was the faster grower of the last couple of decades. I would guess that there is more growth expected out of CL than PG in the near future also. 2.) I think they became better positioned than PG in emerging markets. 3.) Their dividend growth rate has been slightly higher than PG's according to longrundata. 4.) Fewer "stumbles" with products/pricing/acceptance than PG. There are probably many more reasons and it's as much perception as reality.
If I was going to pay those multiples, I'd be leaning more to CHD than CL, but their starting yield is even lower yet a very interesting growth story. Of course, higher growth can lead to a misstep that could cause the price to be more volatile.
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“While the dividend itself is merely a rearrangement of equity, over time it's more like owning an apple tree. The tree grows the apples back again and again and again, and the theoretical value of the tree doesn't change just because of when the apples are about to fall.” - earthtodan
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09-03-2014, 04:43 PM
(This post was last modified: 09-03-2014, 04:44 PM by Robandcindy2.)
CL traditionally trades at or above it's normal PE ratio (15 year is 21.2)(10 year is 19.7)(5 year 18.9).
Personally it is a buy between $44 and $56...and 10 years from now????
On 1/31/06 it traded at $27.24. Not even 8 years later $64+....
Deep into Recession '08-'09 it was still above $30.
IMHO, it is just one of those stocks that if you just gotta have it, and the business is still sound, you pick yourself a range and pull the trigger in the range on a dip. Then close your spreadsheet and don't look back ...at least for a while.
51 years of consistent dividend increase? What's not to like?
There are people who use up their entire lives making money so they can enjoy the lives they have entirely used up
Frederick Buechner
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I agree with you, Rob, especially if I were a wee bit younger. Still mulling that one but will hold PG and UL for now.
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“While the dividend itself is merely a rearrangement of equity, over time it's more like owning an apple tree. The tree grows the apples back again and again and again, and the theoretical value of the tree doesn't change just because of when the apples are about to fall.” - earthtodan
