Consumer goods companies are favorites of many dividend growth investors. I differentiate these stocks from consumer staples since they focus more on personal products rather than food. Interestingly, there are relatively few investment choices in this category of stocks. Some companies are privately held, e.g. S.C. Johnson & Son, or are large foreign companies that do not trade on a major U.S. exchange, e.g. Reckitt Benckiser (OTCPK:RBGPF) (OTCPK:RBGLY). But in general, consumer goods companies exhibit stable earnings and cash flows over long periods of time. In turn, this has allowed them to raise the dividend and produce historically decent total returns. Most are Dividend Kings, Dividend Aristocrats, or Dividend Champions adding to their desirability as dividend growth stocks. An added benefit is that consumer goods companies are probably insulated from trade wars. Most generate the majority of their revenue from the U.S. or North America.
I am long a some of these stocks and they form a core part of my dividend growth portfolio. In this article, I compare 7 consumer goods stocks and then analyze them with my weighted ranking model. The highest ranked stock is Church & Dwight Co. Inc. (CHD) with a Dividend Power Score of 8.91. But I currently view this stock as a hold since it is trading near a price-to-earnings multiple of 30X. The second highest ranked stock is Johnson & Johnson (JNJ) with a Dividend Power Score of 8.87. But it too is trading at a high valuation and there is the risk of ongoing litigation related to opioids and baby powder. Investors should keep these stocks on their watch list and wait for a better entry point, which occurs on occasion.