Colgate-Palmolive Company: Is it the Dividend King for You?

September 16, 2022 at 01:00 AM EDT

You've likely heard of the company Colgate-Palmolive, particularly if you're a big fan of that brand of toothpaste. However, the Colgate-Palmolive Company (NYSE: CL) produces so many more products than just toothpaste. Let's take a look at some facts about Colgate-Palmolive Company as well as some pros and cons of investing in the company.

When you're looking to invest in a company that pays out dividends, you're likely looking for ongoing payments from a stock. When publicly traded companies pay out dividends, they share profits on an ongoing basis with shareholders, which may occur on a monthly, quarterly, semiannual or annual basis, depending on the performance and prerogatives of the company.

A company's board of directors must approve the dividend and then will announce when the dividend will be paid, how much each shareholder will get. They also announce the ex-dividend date. This is the date you need to be a shareholder in order to receive the dividend.

Knowing all this, by the time you're done reading, hopefully you'll have a better idea of whether the Colgate-Palmolive Company will fit your investing needs.

About Colgate-Palmolive Company

In 1806, the founder of the Colgate-Palmolive Company, William Colgate, began a starch, soap and candle business in New York City. In 1857, the company was reorganized as Colgate & Company. Later, the B.J. Johnson Soap Co. created Palmolive Soap, which is today developed in 88 countries in 54 variants.

Our MarketBeat profile shows that Colgate-Palmolive Company, which is still headquartered in New York City, manufactures and sells consumer products worldwide, including the following:

Toothpaste
Toothbrushes
Mouthwash
Bar hand soap
Liquid hand soap
Shower gel
Shampoo
Conditioner
Deodorant
Antiperspirant
Skin health products
Dishwashing detergent
Fabric conditioner
Household cleaner

The company's brands include the following U.S.-based and overseas brands:

Colgate
Darlie
elmex
hello
meridol
Sorriso
Tom's of Maine
Irish Spring
Palmolive
Protex
Sanex
Softsoap
Lady Speed Stick
Speed Stick
EltaMD
Filorga
PCA SKIN
Ajax
Axion
Fabuloso
Murphy
Suavitel
Soupline
Cuddly

The company works through a range of traditional and eCommerce retailers, wholesalers, and distributors, including a range of pharmaceutical products for dentists and other oral health professionals.

In addition, the company operates a pet nutrition segment, which produces nutrition products for pets under the Hill's Science Diet brand. Through the Hill's Prescription Diet brand, the company also produces a range of therapeutic products to treat diseases in dogs and cats.

Learn more: 11 Dividend Stocks with High Yields

Pros and Cons of Investing in Colgate-Palmolive Company

What are the pros and cons of investing in Colgate-Palmolive Company? Let's start with the pros and launch into the downsides of choosing this particular dividend stock.

Pros

The benefits of investing in Colgate-Palmolive Company include the following:

Dividend advantages: According to MarketBeat dividend data, the dividend yield of Colgate-Palmolive Company is 2.50% and the annual dividend is $1.88. There's no question that Colgate-Palmolive Company takes care of its shareholders; it has offered an increasing dividend over the course of 59 years, which means it's a Dividend King. The Dividend Kings increase their dividend payment for at least 50 consecutive years, which makes them reliable dividend stocks if you are an investor looking into a stable income stream.
Recession-proof investment: Recession-proof investments hold steady in value during a downturn in the economy. For example, consumer staples (like groceries, household products and other necessary goods) are recession-resistant. People still need everyday items like toothpaste, even during downturns in the economy. The Colgate-Palmolive Company fits into the category of a type of investment that can do well in a downturn.
Household-name brands: The Colgate-Palmolive Company has brands that enjoy a household name with strong reputations. The company is also diversified across many different countries. In fact, it sells its products in hundreds of other companies outside the U.S. and derives more than half of its sales from outside the U.S.

Cons

On the flip side, it's worth taking a look at the cons as well:

Struggling shareholder value: Colgate-Palmolive has had trouble creating shareholder value over the past decade, challenges with organic growth, increased operating expenses, inflationary pressures, challenges with emerging markets and recently declining market shares.
GAAP EPS declines: In its Q2 reports, the GAAP EPS declined 13% to $0.72 and base business EPS declined 10% to $0.72. Ultimately, on a GAAP basis, the company expects a decline in gross profit margin, increased advertising investment and double-digit earnings-per-share growth.
Low dividend and growth rate: The company doesn't seem to have it in itself to skyrocket in value. Ultimately, it's a low-growth rate stock, so it may not be the most exciting stock on the market. In addition to that, its lackluster growth and lower dividend yield (compared to other companies on the market, that is) might give you pause.

Learn more: 10 Dividend Stocks to Hold Forever

Is the Colgate-Palmolive Company the Right Dividend King for You?

Why may you want to consider investing in a Dividend King? Dividend investors shoot for the Dividend Kings companies because they pay a constant dividend and continue to increase that dividend over a number of years. It can be a great way to build wealth over time, take advantage of passive income, generate income for retirement and offset inflation during tough economic times.

A dividend investor can boost your total return, but it's important to choose the right type of investment for your particular needs. The Colgate-Palmolive Company may not be truly exciting because it's a low-growth rate stock with a yo-yoed history of stock returns. If you’re looking for major capital returns and/or the largest dividend payout, you may want to look into other options compared to the Dividend Kings. However, if you're looking for steady growth over time, it may fit your needs well.

Consider the list of Dividend Kings vs. Aristocrats if you're interested in checking out some other high-performing stocks. Consider investing in several dividend stocks at the same time for a shot at a more diversified portfolio.

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