Church & Dwight Co., Inc. (CHD): Would You Rather Own Bonds or This Stock?

Why have margins done so well? Part of this has to do with declining interest expense, something that all companies have benefited from. But Church & Dwight has little debt, making them a good candidate where safety of capital is a priority, so this is only a little part. Much has to do with management knowing how to run a business in an optimal way. This includes focusing on the key brands, of which the company identifies eight, and driving market share gains. The company has a good split of premium and value brands, which has also been crucial as frugal consumers continue to shift to value brands. Investors can feel confident that management is driving the ship in the right direction.

Increasing margins isn’t easy to do either as several peers have seen little change during the last decade.

PG Operating Margin TTM data by YCharts

The Foolish Bottom Line

Church & Dwight Co., Inc. (NYSE:CHD) makes for an ideal equity swap for investors looking to reduce their fixed income exposure. The company is small enough to maintain its laser-like focus on key brands but has the size and stability to generate some of the most consistent results among all public companies. The stock trades at a 5% premium to Colgate and a 20% premium to The Procter & Gamble Company (NYSE:PG) using P/E ratios, but it is growing at ratios much higher. Buying now seems like a near certainty to yield 10-year total returns well in excess of investment grade bonds. Waiting for a modest pullback would only enhance the stock’s total return potential.

The article Would You Rather Own Bonds or This Stock? originally appeared on Fool.com and is written by Justin Carley.

Justin Carley has no position in any stocks mentioned. The Motley Fool recommends Procter & Gamble. Justin is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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