Welcome back. Everyone. On today's episode of the Joseph Carlson show, we're going to be discussing one company that is basically Unstoppable. It is a recession-proof durable dividend-paying company. That's outperform the market over virtually every timeline and it's not in my portfolio. So I want to run through some analysis and talk about this company later in this episode, you might be familiar with the company. You might not either way, we're going to go through it.
It's called Church & Dwight and even if you're not familiar with the company, you're almost certainly familiar with the brand arm and Hammer. Now again we're going to go through this company. I'm going to try to highlight why the performance of it has been so incredibly. Good over such a long period of time. This is one of the contenders to be added into my portfolio or to be on the watch list if any of my companies in my portfolio
aren't performing. Well this could be one that I could potentially swap that Holding Out for and we have a lot of other news to go through a lot of people understand that I love dividend investing, but they're not really sold on it. They don't really get why in this article released. Just From The Wall Street Journal highlights, many of the very points of vial of dividend investing. So I thought this would be fun to run through as well.
We'll be looking at this article and why dividends really help lift the market up when everything else seems to be struggling. We also have the CEO of Costco being asked, if there's any chance whatsoever in any inflationary environment, like we're in right now, whether or not he's going to raise the price of the one dollar and fifty cent hotdogs and drink combo. Now, you probably can predict The answer, but the way that he says it is still funny so I'm going to show it anyway.
So we have a lot to jump into in this episode. If you haven't already, hit the Subscribe button with the Bell notification. Now let's go ahead and first talk about the market for a minute. This portfolio is doing okay over the past week. It's move just barely one point one, nine percent that's four thousand dollars over the past month or up 2.7 percent, eight thousand, nine hundred dollars, these aren't big moves and I'm
okay with that. So far the portfolio has performed this Are slightly better than the S&P 500. That's nothing to brag about or get excited about but it is doing okay. It's holding its own, it's preserving my Capital to some extent. Now, right now, in this market it feels like we're playing a game of just trying to hang in there. Just trying to have our portfolio. Be okay. And weather the storm over the past month. I'm up a little bit, but in
dividends. I'm up. 1200 $30, I was paid over $1200 in dividends in the past 30 days, so no matter. Matter what direction the market gains go, whether investors get frightened, and sell out, whether they get excited and enthusiastic and buy-in and capital appreciation goes up. These dividends will continue to act as a snowball compounding my returns over time, come thick or thin.
That's the whole purpose of this style of investing is so they don't have to worry about price movements with your company's we're focused on the underlying fundamentals. The operating results of the company's, the dividends in cash flow of the companies and whether they return that money through Benson by packs. I'm okay with either, but I want them to continually generate free cash flow and return it to me. The shareholder.
The Dividends are the most secure way and most consistent way that I've seen companies do that, I love the entire concept of having the money moved from the customers Pockets into my pockets. But right now, it has been a game of just holding on and hoping that we're not going to lose more money in the market. The big fear as of right now for investors is that we're headed into earning season.
It will spark a neck Equity sell off because all of these companies are going to be a very bad earnings reports. They're going to lower guidance. They're going to say our margins are being crushed because we're getting less customers and inflation's eating away at our pricing power. And because of that equities, which are stocks are going to sell off. That's what the analysts and experts are predicting. Now, I can't say whether that's true or not, that is macro investing.
They're certainly going to be some companies that report, very poor earnings, they guide down and their revisions will go down and the stock price will go down so I could see that happening in Scenarios. But I think that this might be a concern that really doesn't come to fruition. I think there is a chance. These companies report decent earnings, the type of companies that usually report pretty resilient earnings are dividend payers.
And the Wall Street Journal has an article out today that I thought was pretty incredible. They highlighted a lot of things that I've been talking about for a long time dividend payouts, set another record in the second quarter, a reassuring sign to investors, who have flocked to steady income generating stocks during the market downturn. This year, this is what I like to see. Come But he's generating more income returning that back to the shareholders.
It's such a great relationship to have with a company and this isn't something unusual. They say, annual dividend payouts have notched new highs every year for a decade. If you exclude, the one slight decrease in 2020. I feel like for this entire year, most of us have heard only negative news. So let me highlight some positive news. Here payments this year, are projected to grow at a faster Pace than usual. As companies have logged strong sales and are passing on a
slice. Of the elevated profits to shareholders. Yes. To meet a dividend payments, will jump more than 10% in 2022 from last year's record. 511 billion, which would Mark the first double-digit increase since 2014 isn't that such a huge contrast from all the negative news that we hear these companies are profitable, they're generating more, operating income, the returning, a record amount since 2014 increase in dividends more than 10 percent.
That means that your dividend income if you're Your dividend income investor is outpacing inflation. You still should be making money on top of the record. High eight percent inflation. That's a lot better than a savings account. That's a lot better than treasury bonds. That's better than basically any other way to get growing passive income. They say business is want to send a message to investors that they're in good health. The dividend is the way they
send that message. Quote, if they can maintain their dividend and grow their dividends despite the challenges that tends to signal that they're confident about their business out. So this is the way they signal to the market and they show investors things.
What their actual business are going just fine, the broader Equity Market has struggled this year amid, the challenge in crosscurrents, but dividend stocks have seen a Resurgence in 2022. As investors seek a regular stream of cash to weather the economic turmoil during easy mode. When the FED is on your side.
When the FED is getting rid of all of the problems in the market, giving an endless stream of money to bad companies, that lose money on a consistent basis when cap Little is very cheap. Then investors start to take on excess amounts of risk, they want to get easy money and easy returns. So they Venture off in the free cash flow. Negative companies, they Venture off into companies have very
unproven business models. They tell stories about how these companies will revolutionize and change the world. Then when things start to go south when the economy starts to slow down or run into any issue, investors run away from those Investments aggressively and they seek shelter in companies that generate real profits and return. Those It's the shareholder. This is the cycle that I've seen happened numerous times. And I think it's safe to say that in most cases investors
would make more money. If they just stuck the companies that can weather harsh storms, companies that generate consistent, meaningful profits. These are good companies to invest in, for a long period of time. The companies that have the grandiose Stories, the companies, I don't have any business model, those are ones that you probably should avoid. And if anything they're short-term trades, if you have that mentality, the out
performance of dividend stocks. Highlights the market rotation of 2022 for the past decade. Mega Cap Technology, shares and stocks with high valuations, led the Major indices higher this year, the rising rates and hot inflation. Turn the market upside down with investors, ditching high-flying companies for Overlook stocks like dividend payers, that offer
greater stability. And I would add in this sentence, the ditching, high-flying companies means that investors in many cases, got burnt and they got burnt badly and now they're just King to not get burnt. Again, dividend payers typically provide that you're not going to get the most excessive Returns on a one year basis. But what you will get is far less volatility and more consistent returns. Dividends finished the first half as the only investment factor with a positive return.
So, during harsh market conditions, these are the only companies doing well, they're profitable, they're making money, they're paying dividends and a rising rate environment, that's very effective. Of course, that's effective, but that's not just effective in a rising rate environment. Eric Didn't this is effective all the time. This type of investing works all the time, not just in Rising rate environment for lower rate environments.
These companies will give you returns around the clock. Now, every time I bring up dividend investing, someone will inevitably bring up share BuyBacks as the better alternative to divot investing, it's the same thing as dividends essentially the company's reinvesting, the money, but it doesn't have any of the friction or the tax consequences that dividends have. That's what people profess.
But when they say that they're emitting something, Probably important data that differentiates dividend investing from share buyback. Investing companies are also using their catch to repurchase their own shares at record levels. That's BuyBacks with the second quarter by back expected to set fresh highs of 286 billion dollars, according to the S&P, Dow, Jones, indices. So BuyBacks are also reaching a record high. So again, you could say Joseph, don't you prefer BuyBacks over
dividends? I do not. And here's why corporations tend to favor BuyBacks over dividends because share Prices typically respond more immediately to repurchase programs but the ratio of BuyBacks to dividends which is currently higher than the historical average should come back down as the year goes on and the effect of the tough economic environment increasingly ways on companies. So, even though right now we're in record by backs, they're predicting that by the end of this year.
Share buyback, programs will decrease, they won't increase for dividend programs. They're predicting that they will increase not decrease, This highlights, the fundamental difference between BuyBacks and dividends BuyBacks are far. Less Dependable than dividends and BuyBacks are done at the worst possible time in most cases. So although I do look at BuyBacks and I do welcome them I don't put them in the same category as dividends. I don't consider a buyback. A tax-free dividend, they are
different in the way companies. Treat them with their Capital. Allocation policies is completely different quote. If companies want to pull back, it'll be towards those BuyBacks, they're not going to To pull their dividends Dividends are the last thing that you cut. You don't want to tell the whole
world. You have a cash flow problem so companies can nonchalant anytime cancel their buyback program and for most of the time, investors shrug, their shoulders and keep investing, but cutting your dividend program is really signaling to the market that you have other issues with cash flow. You're really needing to preserve cash. For some reason because you can't support your dividend, they signal two very different
things to the market. And again, they shouldn't be treated the same because they're not Run in the same manner. This is the BuyBacks from the S&P 500, every single quarter. So you can see how volatile it is in 2006, BuyBacks reached an all-time high then during the recession they went down dramatically then they kind of climb back up very volatile but they did climb and now they're reaching a record high.
So investors can celebrate the BuyBacks but notice how volatile every single quarter is you don't know whether or not next quarter is going to be higher or lower. Compare this to the chart of dividends on a quarterly basis. And then tell me that companies treat these the same way that they're the same thing that they have the same use in the same implications. They do not. The Dividends are far less volatile. They barely fell in 2009 and in 2020.
It was a minor fall that quickly recovered from quarter-over-quarter. They steadily increase over time without any of the volatility that BuyBacks have. So I like BuyBacks and if they were as Dependable as dividends and they really were consistently growing over time with less volatility than I would have a preference for BuyBacks / div Unfortunately, that's not the case.
That's not what the data shows. So as of right now, my preference remains for dividends and BuyBacks is a secondary preference, but in my portfolio overall, I'm looking for highly durable companies that can weather any storm produced free cash flow on a consistent basis. And they can return that to the shareholder via dividends or BuyBacks that typically grow over time one of the companies in my portfolio that you might know by now that I kind of like this company just a little bit
I've made. A couple videos on the company, one of them talking about it being the best business model ever and then the other one I think I said something like it's the best company in the world, something like that. But anyways I kind of like Costco a little bit and not even
joking. This is really what I consider to be. Maybe the best company in the world in terms of how it treats communities shareholders, customers across the board, how it runs its company the capital allocation they never carry excess debt. And at the same time at compounds at a far greater rate than the rest of the market and one of Interesting pieces of data that you learn about Costco is that they've never raised the price of their one dollar and fifty cent hotdogs and drink
combo. This is not some tiny hot dog, like this is a this is a good hot dog with the soda combined with it with the free refill for a buck 50. They could easily charge three, four, five dollars for this and nobody would blink, nobody would really care. That would be consistent with the rest of the pricing, the world's doing right now, they're charging probably less than half of What this would be in a fair market? They're the only thing really fighting inflation.
Costco's, hot dog and drink combo is the one thing that hasn't gone up dramatically and value. Here's the CEO of Costco answering a question about when they're eventually going to raise the prices of this hot dog and drink combo. Craig, you must be tired at this point answering questions about food court. But you did tweak some prices on some items on the menu which inevitably leads to speculation about the hot dog. Combo is there. Any inflationary environment?
Where you would raise that price? No, he just says no, he's not racing. It and this is the attitude. That Costco has I love this company. I love the CEO. I like the way that he thinks about the business. They are so long term, Focus. Any other company would want to make quick marginal gains by raising the prices of every items to get more money out of the customer right away.
Costco's the Exact opposite. Everything they do is with an incredibly long term, Focus. So, Costco's one of those companies I plan on having in my portfolio for the next decade. Plus I really think I'll have this one for a long time. I've already had it my portfolio for three years so I think I can do at least another seven with this company plus much longer. This would be one that I wouldn't mind retiring with while owning literally going into my 60s and 70s.
Owning this stock companies I can buy into now a known them for life. One company that I've been doing analysis on is the owner of Arm & Hammer. Which is Church & Dwight and I want to share with you some of the things I found about this company because it's pretty incredible. First of all, I know what you're thinking Church & Dwight, this is a consumer staple company. How boring? This is going to be the most boring analysis. I promise you, it won't be.
And usually in investing, boring is good boring companies, do well. Exciting companies that attract a lot of attention of investors are usually bid up to incredibly. High valuations and have lower returns over time. I'm the companies like Church & Dwight, the companies like Costco that rarely ever make. The news typically are the best Compounders in the market over
Decades of time. So having said that, let's go ahead and jump into it. Now before we jump into the fundamentals, I first want to highlight the performance of this company. The performance of Church & Dwight stock just to highlight how incredibly ridiculously good it is, this is one of the best performing companies that I've come across while scanning a lot of different stocks.
I've been doing analysis on a lot of them in this one really struck me. As a good performing company Church & Dwight over the past four years, has outperformed, the S&P 500 with a 16%, kegger compound annual growth rate, compared to nine point eight seven percent for the S&P 500. So 16 percent verse nine, point eight percent. It's about double the returns of the S&P. 500 over, just the past
four years. Let's not cherry pick data points here, let's go out a little bit further to 2010 Church & Dwight has outperformed the broader Market with a 17.3%. Lb annual growth rate compared to the S&P 500's very impressive 12.3. So it again, outperform to a large extent. Let's go out quite a bit further than that. Double the timeline to 2002.
This gives the S&P 500, the benefit of the doubt because this is after the market crashed in 2000, which Church & Dwight did not crash nearly as much as the rest of the market. So, I'm actually doing the rest of the market, a favor here and starting in 2002 instead of 1998. Even so Church & Dwight has outperformed the broader Market since 2002 by returning 17.3 percent per year, while the S&P
500 is returned. 8% 17% verse eight percent compound annual growth this, both beat the S&P 500 and the QQQ over this timeline and it did. So as a boring company with low volatility, that had a Max drawdown, a maximum drawdown of 21 percent in And nine, while the S&P 500 went down roughly 50%. So it not only doubled, the compound annual growth rate of spy, but it did so with dramatically less volatility and lower draw Downs. So I'm sifting and doing research on dozens of companies
and I come across one like this. I want to find out what's generating this outperformance. How does a company double? The S&P 500's returns with the lower volatility and let's draw Downs for over 20 years and is still doing it to present day. That's something that really intrigues me. So let's go. Don't look at some of the fundamentals of this company. That's driving it dramatic outperformance. This is going to be using a website called quatrain insights.
This is something that I developed as part of the patreon so that you can look at the fundamentals of a company, in a very easy to understand. Visual way it displays all the important fundamentals in seconds. The first chart that I typically look at is a top-line, revenue, growth of the company. Obviously, you can see the company's grown, its Revenue, all the way back from 1985, and it's done it on a pretty consistent basis.
Maybe five to ten percent Percent per year and it accelerated a little bit over the past couple of years. So that might be a pandemic situation, A covert situation, I'm not sure but we can easily see there's a good trend of Revenue acceleration last year. They generated 5.1 billion dollars in Revenue. So they're generating 5.1 billion in revenue and then last year they also generated 1.3
billion dollars of ibadah. So you can kind of get an idea of how much of their revenue gets transferred to eat better there and the ibadah trans looks. We similar, they grow the revenue, they grow their ibadah. Now, the next important metric that I look at is the free cash flow. You can see since 2002, it's been consistently positive and now they're generating around 875 million dollars of free cash flow per year as pretty good for a company that's doing five billion dollars in revenues.
They're converting around 20% of that into free cash flow. If we look at this on a per share basis, which factors in dilution, they're growing it at an accelerated pace, which means they're doing, share, BuyBacks over this time. So you can see the Free cash flow per share, go up and up, and up, over time, which means for every share you buy of this company, the free cash flow on that share is increasing their net. Income is a next important
thing. We would look at it follows the exact same Trend, it's almost always positive and one thing to note is the actually generate more free cash flow. The net income, the earnings per share of the company as you would suspect are going up over time. They had a dramatic increase in 2020 and 2021. Now, if we look at the balance sheet hair, this is important to look at for any company they have taken on more debt.
So if I just filter by the debt only, You can see the spike around 2017. My guess is, they didn't just decide to spend on something useless, but they actually did a merger or acquisition. They actually purchased another company and raised a couple billion dollars in debt. That would be my initial assumption on this and now, they're probably working to pay back down that debt over time. So, with whatever they purchase, they had two point 1 billion
dollars in debt. Now, they have 1.6 billion which is a very good Trend seeing The Deco down after time, especially after an Ian is something you want to see if we factor in the cache at the same time, they currently have a hundred and seventy four million dollars in cash. Now, I don't typically compare the debt to cash because that's not really how companies operate. They use cash to fund their current operations.
They use debt as leverage to be able to do Acquisitions and purchases and the debts typically paid off with cash flows, not existing cash. So while they have 1.6 billion dollars in debt last year remember they made one point three billion dollars in ibadah Their debt is not even one year's worth of ibadah. Meaning they could pay off this debt within a year. It is not a big deal at all. Now obviously we're looking for good dividend payers here. This company is a very good dividend payer.
I don't know what happened in 1989, they lowered the dividend. That's so long ago that I'm really not too concerned about it. I want to look at the semi recent history of the company. They started accelerating their dividend around 2009 after the recession and you can see these gargantuan leaps and dividend payments. This is a very impressive did In history, since 2009, they were paying a to Penny dividend, two, pennies per quarter.
Now, they're paying 26 Cents. So if you had bought this company 2009, your dividend payment would have increased by 13 times and even since 2015, they've increased by roughly 70%. So this is a company that likes to increase their dividend over time and this is certainly because they're generating more cash flows, they have room to pay this dividend, it has a lower starting yield of 1.1 percent but the payout ratio is very low at 31% for Staple.
And the dividend growth has grown very consistently sought. Expect this company to continue growing, its dividend at a very good Pace known. As we saw what the free cash flow per share growing over time. Faster than the cash flows. That typically means the company's doing share BuyBacks, which you can see here since 2009. They've also bought back a lot of their stock. Reducing it from 287 million shares outstanding to 244. It looks like recently over the
past couple of years. They haven't been doing BuyBacks as aggressively, but instead of been focusing on increasing their dividend, which I'm fine with. Either way, the returning money's good, I don't have any problem with them doing that. Now, another thing that we can look at what this company is the margins of the company. The profit margins, for example, have been increasing over time. Generally speaking quarter by quarter, the average profit
margin is up to around 16%. So, this is what we want to see what the company. Margins going up, not going down. This means that they have either better pricing power, they can raise prices, maybe they're doing more Sales Online, maybe they have more. Efficiency with their Logistics. Whatever they're doing, they're making more money with the revenue. They're getting basically every metric I look at across the board is moving in the right direction and it makes sense.
Why these fundamentals would Propel this company to have long-term outperformance, but what does this company doing qualitatively to be able to grow? Like this really, what is Church & Dwight doing to make this happen? We look at their brands and products. There is nothing exciting about this. These are the products that led to 17 percent annualized returns for the Past 20 years beating both the Q and the S&P 500, a bunch of name brands that sit
and grocery stores. That you wouldn't glance twice at Arm & Hammer Waterpik, you have home care products, personal care products, OxiClean and extra. This is boring stuff, they're not revolutionising. The world are using machine learning or Reinventing health care. They're simply selling a bunch of boring name. Brand products that everyone uses now, it's boring and uninspiring, as many of those products are they've led to this great out.
Foreman's in combination of the executive team in the management of this company. They have what they call, their Evergreen model. Our long-term mission is to maintain a track record of delivering outstanding. TSR total. Shareholder returns are long-term plan for delivering Superior. Returns is based on what we call our quote, Evergreen business model 3%, annual organic Revenue growth. So three percent Revenue growth on the stuff they already own.
That's non acquisition. Non merger growth. Now that's a low amount of growth but that 3% is helpful in their total returns. Look at how they leverage that organic growth to get Superior total returns. So we have that 3%, annual organic Revenue growth and eight percent annual increase in earnings per share. So now they're saying, they want three percent, organic Revenue growth. Eight percent earnings per share
growth. That seems very reasonable to me. Now, they say the 3%, annual organic Revenue. Growth is driven in the US by two percent year-over-year and international by 6%. So the mixture between International in the US with the international growing faster. The u.s. growing slower equates to that three percent Revenue growth, then our Specialty Products five percent. So they also have Specialty Products that they've moved into their going to see five percent
Revenue growth from those. Now the eight percent earnings per share growth is driven by a 25 basis, point gross margin expansion and a 25 basis point reduction of overhead costs. Resulting in operating margin improvements of 50 basis points. This is a lot of technical ways. Of saying that they're going to increase their margins and lower their overhead, which further increases their profitability achievement of our Evergreen
model. Influences, both are short-term and long-term decisions, making a promoting financial literacy inside. Our company, it is an important part of our success. So I really like that. They have this very nuanced and transparent model of how to achieve these returns. They don't just say that they're going to have great you know a great company that's going to do great things and give really broad general terms. Big of specifics 3%, annual organic Revenue growth.
Eight percent increase in earnings per share driven by all these different factors which include sales growth and marginal improvements. That is a specific framework for this company to achieve their goals and they even break down the specific factors that will lead to their long-term success and which have done. So in the past number one, a diversified product portfolio. This is something that I actually prefer about Church & Dwight over some of the current
Holdings that I have. When I look at this, I see me. Many brands that generate a lot of Revenue across the board. When I look at a company, like Nike, I don't see as much diversification. Even though Nikes a great brand, everything is reliant on that one brand name.
They really aren't Diversified in the same way that a company like Church & Dwight is to. They have very powerful brands with substantial pricing power while we sell over 80 Brands 14 of the Brand's generate over 80 percent of our revenues and profits. The 14 brands are Brands, consumers, love and consequently are Market leaders.
Connect with consumers, through execution of Creative Marketing, innovating new products and sustaining marketing spending resulting in high market, share for Our Brands. So they have that long-term vision of continually keeping their Market position. The company still has growth ahead internationally. They're Evergreen model their framework for growing, their business calls.
For a consumer, international business to grow Revenue, 6% annually today, 18 percent of our sales are international and growing rapidly in 2021. We posted organic growth of 5% below. Evergreen model is 6% but lapping 8.6 percent growth in 2020. 2021 represented strong performance in the face of inflation. Widespread Global Supply Chain, disruptions impacts from covid-19, and weather-related events are Global Market group, grew almost 11 percent, and now represents 35% of our
international business. We have fully operational subsidiaries and six countries, the UK France, Germany Canada, Mexico and Australia, and Export to over 130 countries. So they're doing a big push. And I think they see this as a major growth path ahead. I would assume most of the growth in the u.s. is simply by raising prices and they're already an 86 percent of households in the US. The next one, they mention here, I think is a significant growth
path which is animal nutrition. Now, they're not talking, I think mostly about pets like cats and dogs. Actually think they're talking about animals that we eat for protein. And I know that there's a popular Trend to say that that's all going away. And nobody's going to become vegan and eat these fake meat burgers and and vegan foods. And while I think that's a good Movement, we probably should for health eat less animal protein.
Overall, I don't think it's going away and I think that's going to be a growing Market over time Church & Dwight thinks so too. They say we expect our specialty product business to grow revenues 5% annually. Driven by your animal and food production business, the global population is expected to rise from 7.7 billion today. 29.7 billion in 2050, the demand for protein will increase with population growth at the same time. There's a trend away from the use of antibiotics hormones and
chemicals in animal nutrition. Our portfolio for natural supplements, prebiotics and custom probiotics for dairy cows, poultry cattle and Swine are well, positioned for This Global growth in 2015, Dairy represented 99% of animal productivity business, which is cyclical. Our focus on non dairy business. Now 24% has created a better balance, considering the population Tailwinds and the strength of our products we have strong confidence in the
long-term growth DCL, smart. What they're doing here is in 2015, they had most of this category of animal nutrition which is just one category in their business but the issue was it was cyclical and their consumer staple business. They don't like to be cyclical. They like to be non cyclical way trainings. Their business goes a long. No matter what's happening in any environment.
Now they're non dairy. Business is 24 percent so they're diversifying even a subcategory of their business to have more consistent revenue and consistent profits. This is something that I think is incredibly smart from the management team. Now before I move on to the next point, I have to plug the sponsor real quick which is FTX u.s. they're supporting the channel and a lot of people know about them as the crypto currency exchange. They're one of the biggest ones in the world.
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And if you sign up, use the referral code Carlson CA RL s 0n that gives you $10 when you do your first 100 dollar trade so you can sign up now and let me know what you think. The next thing that they highlight is their growth in online sales. They say their long-term success requires them to be digitally Savvy. One of the important Measures of digital skills is online sales. I mentioned earlier, looking at their margins increasing that some of that is probably due to online sales.
They say in 2015, only one percent of our sales were online and 2021 approximately 15% of our Global sales were online, excluding click and collect, which is online ordering and picking up in stores. So just their pure online sales have grown from 1% to 15% from 2015. Now they go on expressing, how they're A digitally dumb company. They might look like a consumer staple company, but they do have tech savvy and they are increasing their market share in the online world.
The cost structure is important. Of course, for every company they highlight how they're putting a focus on their gross margins to improve cost structure. Number seven, they say grow through Acquisitions Church & Dwight has a long history of successfully acquiring businesses over the past 20 years. They acquired 13 of our 14 current power Brands. So this company grows through Acquisitions 13. They're 14 are through Power Brands, there's nothing wrong
with that. They do have some organic growth but they really grown their brand strength through Acquisitions to illustrate our long term acquisition mindset. We like to say, quote 14 power Brands today, 20 tomorrow, we possess a competency and targeting acquiring an integrating Brands and businesses in a world where seven out of ten Acquisitions. Do not create value. We have a superior track record and making a Creed of Acquisitions. We are disciplined and adhering
to clear. Acquisition guidelines, we quickly integrate Acquisitions to leverage our existing Capital base and Manufacturing Logistics purchasing an other back office functions. Number eight, they say, best-in-class free cash flow conversion, free cash flow conversion is the rate of how much of their net income goes in the free cash flow. If a company has a lot of net income but not a lot of free cash flow, their free cash flow.
Conversion rate is very low. They say in 2021 our free cash flow cash from operations - capex was a 875 million. That's what we saw in qualtrics on the cash flow chart with a free cash flow conversion rate of 116 percent. That's what I mentioned while looking at qual trim with them having more free cash flow than they had net income. And that's a way of saying this company. Generates true prophets, they generate real cash number nine.
They say they have Superior overhead management maintaining tight controls on selling General. And administrative has been a Hallmark of Church & Dwight. This is something that we can look at as well to see if they really are keeping control over their expenses. On courtroom there's a tab called expenses which pulls up the general expenses. A company has capex which is the spending on hard Goods like locations trucks uniforms, that
type of thing. Then you have a yellow hair orange the sales and marketing and read you have General and administrative which is the overhead of the company you have accountants and lawyers and administrators in general
administrative. And then until here you have research and development, which it doesn't pull it up for this company but you can see what they're saying on the general and administrative here, if we Sir by just that they spent six hundred and six million dollars on General administrative. But this hasn't been growing at as fast of a rate as other companies. So they're trying to control this expense. This overhead rate is one of the lowest in the consumer product. Good space.
We believe we have the highest revenue per employee of any major consumer product goods. Company 1 million dollars per employee a measure productivity, that is often overlooked. So they're talking pretty boldly. You know, they're really selling themselves here. This is for investors. They're bragging a little bit saying how Nimble they are how much revenue they generate per employee. They have crushed the market for
the past 20 years. So the management team has every reason to show off what they're doing and how it's working. The last thing they mention is there simple incentive compensation at Church & Dwight, we embrace the power of Simplicity. This is evident in our simple incentive compensation plan. Our bonuses are tied. Directly to four equally weighted drivers of total shareholder returns, net sales, growth growth. Margin expansion, earnings per share growth and operating cash
flow. So there's no way for the management team to really game the company at the expense of the shareholder. I really like the way that they laid out this compensation package, they say our Equity compensation consist predominantly a stock options that are valuable only when the value of your investment Rises and our senior management team is required, to maintain a significant investment in our stock to be closely. Aligned with, you are stockholder.
In my opinion, a very good incentive structure for the company. So, Do analysis on this company and look over everything. I can see, I really liked it.
I would want this company to be in my portfolio, it checks all the boxes that I look for the issue right now is the valuation the PE ratio on a trailing basis is 29 on afford bases, its 29, that's well, above the S&P 500. So you are paying a premium if the own this company right now, the problem with this type of company, these Consumer Staples that are highly profitable. Free cash flow generative grow over time. Time with low volatility is it's difficult to buy them on a
significant dip. It's difficult to wait and by this company cheaper and if you wait too long, it'll probably get more expensive over the past five years, it's traded down a little bit. I could probably get it in the low 80s. Maybe the drops down below 20, 20 levels to $60, a share that was during the complete worst, part of the pandemic at 60 and then back in 2017, it was at 48 dollars a share but they've done many acquisition sense. And they've grown their free cash flow since then.
So I don't really see this company going back down to $50 a share. I really think it's going to be difficult to get anywhere below eighty dollars a share. So I will be adding this one to my watch list which is a dip finder. I'll be looking at it from time to time and I may look at entering a position at some point in the future. If one of my other current Holdings isn't performing well, or I think this one's a better opportunity given the current price.
So I'll look if there's any type of dips or opportunities to buy into this company, but as of right now, Now, I think it's a great company. That's going to stay on the watch list. So that's all for now. I hope you enjoyed this episode. I'll have more analysis on different companies that I'm looking at buying, but I think now is the time to really start buying into these companies. In my opinion, the market has come down a lot companies that used to be very expensive are now cheaper.
The market could drop further, like, all the analysts are warning, the second half of this year, but we don't know that for sure. What we do know is that prices now are much cheaper than they used to be. So that's all for now. I'll see you in the next one.