The Clorox Company (CLX), Colgate-Palmolive Company (CL) & More: These Stocks Are Buys Even at 52-week Highs

Contrarian idea: The market is skeptical about the company’s ability to meet its organic growth target of 6%-7% for this year. However, the goal might be achievable, driven by innovation in oral care in developed markets, increased distribution in emerging markets, and a turnaround of the Pet Food business.

Key Catalysts: Any signs of volume growth at Colgate’s Hills division improving should be a positive catalyst for the stock. This is expected by mid -year 2013. Other than that, global oral care market share trends are the most important data points to monitor.

Valuation: An EBIT growth rate of 4% in 2013 and 8% in 2014 and 2015, mid-term FCF growth of 5%, a perpetual growth rate of 3% is expected from the stock. These estimates are consistent with a forward P/E multiple one year from now of 20x, which is in-line with the stock’s current multiple.

Apart from belonging to one sector, and being among the stocks that the market is bearish on (and I am bullish), both these stocks share another thing in common – they provide healthy dividend yields to their investors.

Where Clorox provides a yield of 2.9%, Colgate provides a dividend yield of 2.3%. In this respect, this sector has been a darling for the retirees. Belonging to this sector, Kimberly Clark Corp (NYSE:KMB) is another solid dividend stock, which is preferred as being a part of retiree’s portfolio.

The 3.3% dividend yielding stock has a proven business model and a solid product line that vouches for its dividend’s sustainability. Consistent growth and a smart management has helped the company pull out of a harsh environment where cost of production is continuously rising.

Foolish bottom line

Despite reaching their 52-week highs, both The Clorox Company (NYSE:CLX) and Colgate-Palmolive Company (NYSE:CL) are deemed to go higher given the incremental earnings expected from strong product innovation and growth in new markets.

The article These Stocks Are Buys Even at 52-week Highs originally appeared on Fool.com is written by Zain Abbas.

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