Up to date on October twenty fourth, 2024 by Felix Martinez
The Dividend Kings are the perfect of the perfect in the case of returning money to shareholders.
These shares have 50+ yr histories of accelerating their dividends to shareholders. Resulting from their earnings stability and spectacular dividend observe data, they’re usually sought out by long-term revenue buyers.
Simply 53 firms qualify as Dividend Kings. You possibly can see all 53 Dividend Kings right here.
It’s also possible to obtain an Excel spreadsheet with the total listing of Dividend Kings (plus metrics that matter, resembling price-to-earnings ratios and dividend yields) by clicking on the hyperlink under:
Colgate-Palmolive (CL) is a shopper staples conglomerate that has elevated its dividend for 63 consecutive years, one of many longest streaks in all the inventory market.
Maybe extra impressively, Colgate-Palmolive has repeatedly paid dividends on its widespread inventory since 1895.
Colgate-Palmolive has been engaged on rising its development lately. The corporate has made noteworthy progress post-pandemic.
Under, we’ll focus on the corporate’s development prospects, valuation, and dividend.
Enterprise Overview
Colgate-Palmolive was based in 1806 and has constructed a formidable and intensive portfolio of shopper manufacturers. It operates globally, promoting in most international locations world wide.
About one-sixth of its income comes from Hill’s pet meals division, which has proven very sturdy development lately.
The opposite five-sixths of income comes from a mixture of cleansing and private care merchandise, with the corporate’s most recognizable manufacturers being Colgate (tooth care) and Palmolive (cleaning soap).
Nonetheless, Colgate-Palmolive has constructed a various slate of manufacturers moreover its two namesake manufacturers.
Colgate-Palmolive trades for a $80.1 Billion market cap, producing about $19.5 billion in annual income.
Supply: Investor presentation
Colgate-Palmolive has structured itself into 4 models: Oral Care, Private Care, Residence Care, and Pet Vitamin.
The corporate has created and purchased quite a few manufacturers over time and, extra lately, has labored to innovate with its greatest manufacturers by means of line extensions.
Be aware: A line extension, quick for ‘product line extension,’ is when a model launches a brand new product in a class the place it already has a presence. A line extension might be a brand new taste, scent, particular ingredient, and so on.
Under, we’ll take a look at the corporate’s development prospects.
Development Prospects
We anticipate Colgate-Palmolive to put up 8% common earnings-per-share development within the subsequent 5 years, because it has just a few levers it might pull to energy the underside line greater.
Because the firm sells globally, it’s uncovered to foreign exchange translation, that means it’s beholden to many various currencies and their relative worth in opposition to the greenback.
As well as, commodity volatility has generally affected revenue margins, though the corporate has undertaken cost-saving measures to fight this.
One other means Colgate-Palmolive has improved development is by incorporating true innovation into its portfolio moderately than simply making a barely totally different model of an present product.
That has labored nicely for the corporate, too, however the thought is to make use of its huge R&D price range to create new merchandise. Over time, this could result in incremental income development.
Nonetheless, line extensions nonetheless work fairly nicely for Colgate-Palmolive as a result of it might leverage its extremely recognizable international manufacturers.
Colgate-Palmolive has finished this with quite a few merchandise, with its Optic White Renewal being a very profitable instance.
Lastly, Colgate-Palmolive has concentrated its R&D {dollars} on what it calls “premiumization,” which is shifting up-market with its merchandise, because it did with Optic White.
This has resulted in very sturdy natural gross sales development lately.
Supply: Investor presentation
Colgate-Palmolive has had fifteen straight quarters at or above the goal natural gross sales development price of three% to five%. Development has accelerated lately, with the coronavirus pandemic solely being a short lived setback.
This may drive a lot of the corporate’s development within the coming years.
Colgate-Palmolive reported sturdy monetary outcomes for the second quarter of 2024, with web gross sales rising by 4.9% and natural gross sales up 9.0%. The corporate achieved a 48% rise in GAAP earnings per share (EPS) to $0.89, whereas its base enterprise EPS grew by 18% to $0.91. Colgate’s gross revenue margin improved by 280 foundation factors to 60.6%, and base enterprise gross revenue margin rose by 300 foundation factors to 60.8%. For the primary half of 2024, the corporate generated $1.67 billion in web money from operations, sustaining its international management in toothpaste and handbook toothbrushes with market shares of 41.5% and 32.2%, respectively.
CEO Noel Wallace expressed satisfaction with the corporate’s efficiency, emphasizing its fourth consecutive quarter of gross margin development and double-digit will increase in working revenue, web revenue, and EPS. The corporate attributes its success to balanced gross sales development from each quantity and pricing will increase throughout all divisions. Colgate plans to proceed investing closely in promoting, specializing in model constructing and long-term development methods. For the rest of 2024, Colgate expects to maintain its momentum with additional investments in model well being and functionality growth.
Wanting forward, Colgate up to date its full-year 2024 steering, projecting web gross sales development of two% to five% and natural gross sales development between 6% and eight%. The corporate additionally expects continued gross revenue margin growth, double-digit earnings per share development, and elevated promoting funding. Regional efficiency was notably sturdy in Latin America, the place web gross sales grew by 7.6%, and in Europe, the place working revenue elevated by 19%. Total, the corporate is assured in its capability to realize its monetary targets and ship sustainable earnings development.
Aggressive Benefits & Recession Efficiency
Colgate-Palmolive’s aggressive benefit is its intensive product catalog and intensely well-known manufacturers.
This has allowed the corporate measurement and scale globally, permitting it to convey merchandise to market rapidly and at favorable pricing.
Colgate-Palmolive’s recession document is extraordinary, having posted sturdy earnings good points in the course of the Nice Recession:
- 2007 earnings-per-share of $1.69
- 2008 earnings-per-share of $1.83 (8.3% enhance)
- 2009 earnings-per-share of $2.19 (19.7% enhance)
- 2010 earnings-per-share of $2.16 (-1.4% decline)
Whereas earnings dipped very barely in 2010, Colgate-Palmolive clearly performs fairly nicely throughout occasions of financial duress.
Colgate-Palmolive has managed to construct a portfolio that not solely holds as much as recessions however thrives throughout such durations.
Valuation & Anticipated Returns
We anticipate 8% earnings-per-share development within the coming years, and the dividend yield is 2.0% proper now. This implies earnings development and dividends may present returns above 10% per yr.
Moreover, shares commerce right now at 28 occasions this yr’s anticipated earnings, which is above our truthful worth estimate of 24 occasions earnings. Due to this fact, we anticipate a -3.5% annual headwind to complete returns within the subsequent 5 years.
This considerably doesn’t assist anticipated earnings development and the dividend yield, however complete returns are anticipated to be simply 6.5% for the subsequent 5 years.
The dividend is simply 56% of earnings for this yr, and we anticipate the payout ratio to hover round 50% for the foreseeable future.
Due to this fact, we anticipate earnings to rise considerably sooner than the dividend. Regardless, we anticipate Colgate-Palmolive to stay a stable dividend development inventory.
Remaining Ideas
Colgate-Palmolive has a formidable historical past of rising its portfolio over time, and its current deal with innovation has renewed this development.
We anticipate the corporate to proceed rising within the coming years and to see a few years of dividend will increase as nicely.
The inventory seems barely overvalued, which may hinder its complete return potential. We presently price Colgate-Palmolive as a maintain. If it had been to commerce decrease, it could as soon as once more be a purchase.
The next articles include shares with very lengthy dividend or company histories, ripe for choice for dividend development buyers:
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