The DuluxGroup Ltd (ASX: DLX) share price hit a record high of $7.18 this morning in a result I suggested was on the cards after the group recently painted a pretty picture for investors with its half-year results ending 31 March 2017.
The group lifted net profit 14.2% to to $72.2 million for the half-year period, with the dividend up 13% on a payout ratio of 70% of net profit after tax. The group is forecasting that full year profit for FY 2017 will be above 2016's result to continue a streak of unbroken profit and dividend growth since 2011.
Dulux has been a beneficiary of rising household wealth in Australia as rising property prices have encouraged spending on home renovation works, with the long-term outlook for Australian property prices remaining as solid as ever.
Arguably the painting of residential property is more of a consumer staple than consumer discretionary spend and Dulux's dominant market position via its premium branded products and wide distribution networks arguably provides it a narrow moat.
The stock has climbed 145% over the past five years and trades at $7.18 on around 20x analysts' estimates for 36 cents in earnings per share over FY 2017. Analysts are also estimating total dividends in the region of 26 cents over the year, which would offer a fully franked yield around 3.6%.
However, Dulux's net debt stands at 1.5x EBITDA which means the share price is no bargain, despite the reasonable growth outlook. As such it's one I'm keeping on the watch list given there are businesses of similar quality available at much cheaper valuations in my opinion.
