It is estimated that the global premium beauty product market is to grow to a total market size of $85.54 billion by 2014 and grow at roughly 8.5% per year from there.
Despite the global recession men and women alike are continuing to purchase beauty and skincare products with a number of industry players reporting strong rebounds in sales.
Investors wanting to participate in this trend could consider an investment in Avon Products (AVP) which enjoys $10 billion in annual sales and is widely recognized as a market leader. The company is the world's largest direct seller of cosmetics through 6.2 million direct sales agents in more than 100 countries.
Apart from a solid dividend history which has included increases in dividends every year since 1991, Avon (AVP) has had three recent two-for-one stock splits. These took place in May 1996, August 1998 and May 2004.
Investors seeking out a consistent dividend yield will also enjoy an investment in Avon (AVP), with the company delivering around 3% in dividends while trading on a forward price to earnings multiple of around 14 times earnings.
When the company reported first quarter earnings in April it showed revenue growth of 14% to $2.5 billion. Cash flow from operations came in at $17.1 million for the quarter. Net income was hit due to a few extraordinary charges but cash flows were strong and the dividend remained untouched.
The sales growth included gains in all categories namely fragrance, color cosmetics, personal care and skin care which grew 21%, 23%, 11% and 1%, respectively.
The only black mark on Avons (AVP) radar to date has been a slow take-up in China where the company reported an operating loss of $10 million compared with $14 million in profit in last year's first quarter. China obviously represents a massive market with many millions of consumers, but direct selling has struggled to take off in the country. These declines reflect the fundamental challenges in the company's hybrid business model and complex evolution towards direct selling. The company is transitioning away from a hybrid model to one which focuses on direct selling and de-emphasizes retail.
Investors seeking access to the growth in the global beauty product market and looking for a consistent dividend and market leading position and potentially huge exposure to China would do well to consider Avon (AVP) for their portfolios.
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