LRLCF - L'Oreal: Great For The Long-Term Dividend Growth Investor But Not At This Price

2024-06-15 04:12:35 ET

Summary

• L'Oréal is a high-quality company in the beauty industry with a track record of rapid earnings growth.
• The company is operating in an industry with a secular growth trend, has high margins, a solid balance sheet and a management team with significant skin in the game.
• Despite the relatively low dividend yield of 1.5%, the high, safe and constant dividend growth makes up for it.
• Based on discounted cash flow analysis, the stock currently appears to be overvalued.

Investment thesis

Dividend growth investing requires a certain degree of predictability. This will quickly take you to the consumer staples sector. Resilient business models, constant growth and a sector where stable dividend growth often occurs.

Despite the fact that there is always a lot of attention for American stocks in this sector, there are also great ones in Europe. And when we talk about high-quality companies, L'Oréal ( OTCPK:LRLCF ) comes into the picture. LRLCF is the world number 1 in the beauty industry and has an impressive track-record of growing its earnings at a rapid pace. I think this quote, which I read on psychology today , is a nice description of why consumers spend a lot of money on beauty products.

For most, physical appearance is an important thing, as studies show that feeling that one is attractive helps build confidence and self-esteem. The psychology of beauty thus has much to do with individual self-worth and simply feeling good about oneself.

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