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Ecolab Inc. (ECL): Is This a Top-Notch Defensive Play?

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Ecolab logoEven if you’re bullish on the market, downside risks exist. Eventually, rising interest rates, increased taxes, European austerity, a slowdown in China, our own country’s enormous debt, or a black swan event could occur and lead to a steep correction.

Whatever the case may be, you want to be prepared as an investor. Investing in large-cap companies that pay healthy dividends can at least limit downside risk. These are bigger ships to turn, and the dividend payments will help ease your pain.

Impressive innovation

Ecolab Inc. (NYSE:ECL) produces and sells cleaning and sanitation products. It has nearly 50,000 employees, and many of these employees are extremely bright and creative. This, in turn, has led to consistent and impressive innovation, which has helped drive top-line growth. Below are two innovative examples.

Ecolab Inc. (NYSE:ECL) recently launched Stealth Fusion Fly Light. Its fly-zapping efficiency is 170% higher than the standard fly light. This is great news for restaurants as they always want to keep their food from being contaminated.

Another recent product launch is the Kay Heated Soak Tank Program — an extraordinary time saver. Plastic and cookware are cleaned between 15 and 60 minutes, and highly carbonated utensils are cleaned within 72 hours, saving two to three days compared to traditional methods.

These types of innovative products have led to a 5% revenue increase year over year in global pest elimination, and nearly a 10% sales increase for quick-service restaurants. For the latter, Ecolab Inc. (NYSE:ECL) has even seen strength in Europe. This is a rarity for any company in any industry in the current global economic environment. However, other segments haven’t been performing as well in Europe, or North America, for that matter. Ecolab Inc. (NYSE:ECL) is performing well in Latin America and Asia-Pacific. It’s also streamlining its business for margin improvement.

In addition to relying on innovation for continued growth, Ecolab Inc. (NYSE:ECL) is aggressive with acquisitions. For example, it recently acquired oilfield chemical player, Champion. This will improve Ecolab Inc. (NYSE:ECL)’s revenue in its Energy segment.

Are one of these companies a better defensive play?

The Procter & Gamble Company (NYSE:PG) is similar to Ecolab in regards to innovation. Both companies rely on exemplary innovation to help drive growth.

Despite some recent drama and restructuring, The Procter & Gamble Company (NYSE:PG) has proven to be a long-term winner. Procter & Gamble sells consumer packaged goods, including Head & Shoulders, Gillette, Crest, Febreeze, and Bounty. These are all household names, and once a company has established a product line where most of its products are household names, that company is likely to have a bright future. The biggest threat is consumers opting for cheaper generic brands, but the brand loyalty is so strong for Procter & Gamble that it should be able to overcome this headwind. Other positives for The Procter & Gamble Company (NYSE:PG) include a yield of 3.10%, a profit margin north of 15%, a debt-to-equity ratio of just 0.47, and the stock is fairly valued, trading at 18 times earnings.

Johnson & Johnson (NYSE:JNJ) sells healthcare products, pharmaceuticals, as well as medical devices and diagnostics. Johnson & Johnson might not have a reputation as a highly innovative company, but you might recognize some of its brands, such as Tylenol, Band-Aid, Listerine, and Neosporin. Those brands became realities thanks to innovation.

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