Investors looking for the highest-quality dividend growth stocks, should consider companies with the longest history of dividend growth. The Dividend Kings are a select group of 25 stocks, with 50+ consecutive years of dividend increases.

Colgate-Palmolive (CL) has paid uninterrupted dividends since 1895, and it has increased its dividend payments for the past 56 consecutive years. It is a member of the Dividend Aristocrats, a group of 53 companies in the S&P 500 Index, with 25+ consecutive years of dividend increases. 

This article will provide an in-depth review of Colgate-Palmolive’s fundamentals, valuation, and future outlook.

Business Overview

Colgate-Palmolive traces its roots all the way back to 1806. It was founded by William Colgate, who started a starch, soap, and candle business in New York City. The company has been in business for more than 200 years.

Today, Colgate-Palmolive manufactures oral care products like toothpaste, personal care products such as soap, home cleaning products, and pet food. Its major brands include Colgate, Palmolive, Hill’s Science Diet, and more.

CL Overview

Source: 2018 CAGNY Presentation, page 4

On January 26th, Colgate-Palmolive released its most fourth-quarter earnings report. Revenue missed analyst expectations by $40 million, while earnings-per-share matched expectations. Organic sales, which excludes non-recurring factors like currency exchange rates, rose 2% for the fourth quarter. This was below analyst expectations for 2.9% growth.

Global unit volume increased 3%, but pricing fell 1% for the quarter. Earnings-per-share growth was also challenged from higher cost inflation. Gross margin was 60.4% last quarter, compared with 60.8% a year ago. The consensus analyst estimate was for 61.0%. Higher raw materials and packaging costs weighed on margins, while SG&A expense rose 160 basis points for the quarter.

For 2018, Colgate-Palmolive expects net sales growth in the mid-single digits, with organic sales to be up in the low to mid-single digit range. The company expects organic sales growth to be driven by a mix of pricing gains and volume growth. To combat higher raw materials costs, Colgate-Palmolive is also launching a company-wide productivity initiative, to help reduce expenses. The company expects gross margin to rise 75 to 125 basis points in 2018 as a result, which will help Colgate-Palmolive continue to grow earnings and dividends.

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