Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor’s dream. But for income investors, generating consistent cash flow from each of your liquid investments is your primary focus.
Cash flow can come from bond interest, interest from other types of investments, and of course, dividends. A dividend is that coveted distribution of a company’s earnings paid out to shareholders, and investors often view it by its dividend yield, a metric that measures the dividend as a percent of the current stock price. Many academic studies show that dividends make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.
Colgate-Palmolive in Focus
Based in New York, Colgate-Palmolive (CL) is in the Consumer Staples sector, and so far this year, shares have seen a price change of 21.05%. Currently paying a dividend of $0.5 per share, the company has a dividend yield of 2.07%. In comparison, the Soap and Cleaning Materials industry’s yield is 2.4%, while the S&P 500’s yield is 1.58%.
Looking at dividend growth, the company’s current annualized dividend of $2 is up 4.7% from last year. In the past five-year period, Colgate-Palmolive has increased its dividend 5 times on a year-over-year basis for an average annual increase of 3.02%. Looking ahead, future dividend growth will be dependent on earnings growth and payout ratio, which is the proportion of a company’s annual earnings per share that it pays out as a dividend. Colgate-Palmolive’s current payout ratio is 57%. This means it paid out 57% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for CL for this fiscal year. The Zacks Consensus Estimate for 2024 is $3.53 per share, representing a year-over-year earnings growth rate of 9.29%.
Bottom Line
Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. It’s important to keep in mind that not all companies provide a quarterly payout.
For instance, it’s a rare occurrence when a tech start-up or big growth business offers their shareholders a dividend. It’s more common to see larger companies with more established profits give out dividends. Income investors have to be mindful of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, CL is a compelling investment opportunity. Not only is it a strong dividend play, but the stock currently sits at a Zacks Rank of 3 (Hold).
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Colgate-Palmolive Company (CL) : Free Stock Analysis Report
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