The DuluxGroup Limited (ASX: DLX) share price has fallen by 6% over the last two months, I think it could be time to consider buying.
Here are three reasons why you should have DuluxGroup in your portfolio:
Diverse group of strong brands
DuluxGroup owns many household improvement brands including Dulux, British Paints, Selleys, Cabot's and Yates.
Being known for quality with recognisable brands makes DuluxGroup a go-to for house improvement and should allow for prices to be increased at a pleasing rate over time.
Warren Buffet is a big fan of brand power businesses and I think DuluxGroup fits perfectly into this motto.
Defensive earnings
Most of DuluxGroup's products are quite defensive. They will keep being used all year round and through economic cycles.
If a property owner wants to sell their house then they would use several brands to make it better. If a couple are thinking of moving but decide to upgrade their house instead they would use some DuluxGroup products. If a landlord wants to make their property more attractive to tenants they will paint it and potentially do more.
DuluxGroup brands don't require there to be a property boom for there to be increasing demand. Every year there are more properties in Australia which increases the potential for renovations.
Solid financials with a big dividend
DuluxGroup has been a slow and steady performer over many years.
In its latest result for the six months to 31 March 2017 it revealed that revenue grew by 3.5% and earnings per share grew by 14%. This is not bad for quite a defensive business.
The maturity, size and profitability of DuluxGroup allows management to pay out a solid dividend. The trailing grossed-up dividend yield is 5.42%, which isn't bad for a business that grew at double digits.
Foolish takeaway
DuluxGroup is currently trading at 18x FY18's estimated earnings. This isn't a bargain but could be a good long-term investment as part of a diversified portfolio.
Personally, I think the share price could be negatively affected if the property market goes south, which could be the best time to buy.
