Colgate Washes Up Another Dividend

The Board of Directors of Colgate-Palmolive Company (NYSE: CL) declared quarterly cash dividends of $.40 per common share, payable on August 15, 2008, to shareholders of record on July 24, 2008.
For those of you looking for a dividend that is as close to certain as you can get, look no further as Colgate-Palmolive has paid uninterrupted dividends on its common stock since 1895.

Colgate on the Defense

With the turmoil that has been the stock markets in the past weeks and months, many investors (at least those who haven’t gone to 100% cash) are turning to defensive stocks to assist in preserving capital. With a Beta of just 0.31, Colgate (CL) is one of the least volatile dividend stocks on the market.

In addition to a healthy dividend and price stability (in relation to the market), Colgate also offers some excellent growth numbers for a company of such extreme size. Colgate boasts a Return on Assets (ROA) of 17.03 and a Return on Investment (ROI) of 29.07; both of which trump the industry numbers quite handily.

Colgate Dividend Data

With many dividend stocks struggling with earning this year, the management of the company’s dividend payout ratio is of particular importance. Colgate has a dividend payout ratio of just 43.4% of earnings, which will allow for some flexibility in earnings capacity without sacrificing the dividend rate in the short term. A dividend payout ratio of below 60% is a relatively conservative guideline for investing in dividend growth stocks.

When investing in a good dividend growth stock, one of the criteria that I use is to set a purchase price for a stock when its dividend yield is around 25-30% above the 5-year average dividend yield. Colgate’s 5-year average dividend yield is 1.88% and the current yield is 2.27% – a yield that is 20% higher than average.

Another criteria that I use is that the dividend growth rate must be greater than that of the S&P 500. Otherwise a dividend growth investor would be more prudent buying the entire index to mitigate risk. The dividend growth rate for the S&P 500 is currently at 11.0%, while Colgate features a dividend growth rate of over 14% – a healthy 3% points higher than the index.

Buy What You Know -Colgate

Unless you have been living under a rock for the past century, you will recognize Colgate-Palmolive as a leading global consumer products company. The company is very successful in its focused niche markets of Oral Care, Personal Care, Home Care and Pet Nutrition.

Colgate sells its products in over 200 countries and territories around the world under some of the world’s most recognized brand names as Colgate, Palmolive, Mennen, Softsoap, Irish Spring, Protex, Sorriso, Kolynos, Elmex, Tom’s of Maine, Ajax, Axion, Soupline, and Suavitel, as well as Hill’s Science Diet and Hill’s Prescription Diet.

Stock Summary

As investors looking at Colgate (CL), we have a stock that is quite a bit less volatile than the broader market with a beta of just 0.31, a greater than average dividend yield at 2.27% that is growing at a faster pace than the index. In addition, the company has features an excellent return on investment and wide array of well branded products that people still need to buy regardless of economic conditions.

Full Disclosure: The author does not own shares of Colgate-Palmolive at the time of writing.

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>