Estée Lauder’s (EL) dividend increased by 13% with an overall yield below that of the Standard & Poor's 500 Index at 1.57%.
Estée Lauder markets a variety of consumer products including makeup, fragrances, hair care products and skin care. It sells by its primary brand name but also under Aveda, Clinique and Aramis.
Most of the sales of Estée Lauder products come from department stores. Estée Lauder also sells products in perfume stores, pharmacies and discount retailers.
The company has paid dividends on a consecutive basis for 20 years. It currently ranks eighth in yield within the large-cap consumer goods-personal products category.
Estée Lauder has maintained a solid three-year growth rate of dividends of 8%. It also issued earnings and revenue for the third quarter on Wednesday, reporting 84 cents in earnings per share for the quarter, 4 cents above estimates.
However, revenue earned of $2.9 billion did not meet analyst expectations. Its return on equity (ROE) is superb at 33%.
For future guidance for the fourth quarter, Estée Lauder estimated EPS of $1.12, much lower than the $1.31 average analyst estimate. The company's guidance for fiscal year 2017 was $3.38 to 3.44 in EPS. Analysts surveyed by FactSet were projecting 2017 earnings of $3.47 per share. Due to the revenue miss for the third quarter and poor earnings forecasts, Estée Lauder’s stock price dropped to $80.41, a new 52-week low.
The quarterly dividend for the December payment will be 34 cents versus the prior-year rate of 30 cents per share. Estée Lauder does not qualify as a member of our Top 100 Dividend Stocks (see below).
The dividend will be paid at the new higher rate on Dec. 15 to shareholders of record at close of business on Nov. 30. Estée Lauder is currently priced at $80.41. Listed in the table below are the quarterly dividend payments since 2010.
| Date | Quarterly dividend |
| Nov. 30 | 34 cents |
| Aug. 29 | 30 cents |
| May 26 | 30 cents |
| Feb. 25 | 30 cents |
| Nov. 25, 2015 | 30 cents |
| Aug. 27, 2015 | 24 cents |
| May 27, 2015 | 24 cents |
| Feb. 25, 2015 | 24 cents |
| Nov. 25, 2014 | 24 cents |
| Aug. 27, 2014 | 20 cents |
| May 28, 2014 | 20 cents |
| Feb. 26, 2014 | 20 cents |
| Nov. 26, 2013 | 20 cents |
| Aug. 28, 2013 | 18 cents |
| May 29, 2013 | 18 cents |
| Feb. 26, 2013 | 18 cents |
| Nov. 23, 2011 | 52.5 cents |
| Nov. 24, 2010 | 37.5 cents |
Analysis of Estée Lauder is based upon our five key criteria, which include:
| Category | Value | Score |
| Dividend Yield | 1.57% | 330 |
| Dividend Growth (3- to 6-year average) | 21% | 81 |
| Forward P/E | 21.23 | 226 |
| S&P Financial Rating | A+ | 80 |
| Beta | 0.95 | 125 |
| Total Score | 842 |
Additional Information on price-sales (P/S) ratio and historical yield:
| % Yield | 3 Year Div. Growth Rate | 6 Year Div. Growth Rate | SPS 2016 | P/S Ratio | 10 yr P/S Low | 10 yr P/S High | 5 yr max Yield % | 5 yr lowest Yield % |
| 1.69% | 8.1% | 33.9% | 30.50 | 2.66 | 0.93 | 3.02 | 1.93% | 0.64% |
Final analysis
Positives
- Estée Lauder maintains a three-year dividend growth rate of 8.1%.
- Estée Lauder has paid out a dividend consecutively for the past 20 years.
- Estée Lauder maintains a credit rating of A+. This is investment grade.
- Estée Lauder’s current dividend yield (1.57%) is above its five-year average historical dividend yield of 1.29%.
- Estée Lauder maintains a beta of 0.95, lower than the average company.
Negatives
- Estée Lauder’s dividend yield is below that of the S&P 500 Index.
- Estée Lauder is trading at a high forward price-earnings (P/E) ratio, and on a P/S basis it is trading at elevated historical levels. From a relative valuation perspective based upon P/S, Estée Lauder is overvalued.
- The company had a revenue miss for the third quarter and a poor earnings forecast.
The stock price has fallen from $97.80 to $80.41. Despite the price drop, Estée Lauder trades at a high valuation based upon P/S analysis. Its dividend yield is also below that of the market and 20% below its max historical yield of nearly 2%.
The company also has negative trends in both revenue and earnings heading into the Christmas season. Although the firm retains an investment grade rating and maintains stellar dividend growth, Estée Lauder does not qualify as one of our Top 100 Dividend Stocks.
Disclosure: I have no position in Estée Lauder.
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