Up 10% in 2017, is the DuluxGroup Limited share price still attractive?

The DuluxGroup Limited (ASX: DLX) share price has grown by 10% so far in 2017, does this make it the best property-related business on the ASX?

DuluxGroup is the multi-national paint company with a market capitalisation of $2.7 billion. It could still be a good long-term buy for the following reasons:

Broad range of brands

DuluxGroup is the owner of one of the biggest brands of paint, Dulux. However, it also has a number of other home improvement brands and products too. Some of the other brands it owns include British Paints, Selleys, Cabot’s and Yates.

Having all of these brands is a good diversification strategy and provides many different avenues for growth as well. It also shows that management could be willing to invest into other complimentary products.

Defensive nature of paint

Paint is a very common item used in all parts of the property process. If a homeowner wants to sell their property, they will likely paint it. If a new buyer moves into a property and doesn’t like the colours, they will likely paint it. If a couple have been in a property for a number of years and want to renovate, then they will likely paint it.

Paint is such an inexpensive part of any property activity that it will always be one of the first products that people reach for.

Consistently growing

Watching DuluxGroup’s growth is a lot more fun than watching its product dry. Although the business isn’t generating fast growth, it is consistently growing earnings per share (EPS) and the dividend year after year.

In its latest results for the financial year to 30 September 2016 it unveiled EPS growth of 14.7% and dividend growth of 6.7%.


I think the main risk to DuluxGroup’s share price is that the share market sentiment about property-related businesses could sour if the property market itself begins to show signs of trouble.

A good example of this was in November 2016 when the REA Group Limited (ASX: REA) share price fell to under $50.

Foolish takeaway

I think the above reasons make DuluxGroup an appealing defensive business. It’s currently trading at 20x FY17’s estimated earnings with a grossed-up dividend yield of 5%.

I think REA Group offers more long-term growth, but DuluxGroup could be a solid performer whilst paying a solid dividend.

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Motley Fool contributor Tristan Harrison has no position in any stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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