Last update on 2024-06-27

Colgate-Palmolive (CL) - Dividend Analysis (Final Score: 8/8)

In-depth analysis of Colgate-Palmolive's (CL) stellar dividend performance based on an 8-criteria scoring system, earning a perfect score of 8/8.

Short Analysis - Dividend Score: 8

We're running Colgate-Palmolive (CL) against the 8-criteria scoring system to evaluate the performance and stability of a company's dividend policy.

For those who are interested in delving deeper into the specifics, the subsequent section provides a comprehensive exploration of the criteria.

Dividend Yield Higher than the Industry Average?

Dividend yield is a financial ratio that shows how much a company pays out in dividends each year relative to its stock price. It is essential for income-focused investors as it indicates the return on investment from dividends alone.

Colgate-Palmolive's (CL) current dividend yield of 2.3962% is higher than the industry average of 1.82%. Historically, CL's dividend yield has remained relatively stable, hovering above 2% but occasionally dipping below. Over the past 20 years, the dividend yield has shown resilience even during market turmoil, such as the 2008 financial crisis and the COVID-19 pandemic in 2020. Comparing to the industry average over the same period, CL's yield has consistently outperformed in most years. The latest trend of 2.3962% alongside a closed stock price of $79.71 in 2023 indicates a robust dividend policy. This trend is good, as a higher dividend yield suggests that CL offers better income potential relative to its peers, making it an attractive option for dividend-seeking investors.

Average annual Growth Rate higher than 5% in the last 20 years?

The Dividend Growth Rate is the annualized percentage rate of growth that a particular stock's dividend undergoes over a period, typically expressed on a per-annum basis. This is an essential measure for dividend-focused investors as it provides insights into the company's ability to increase its shareholder payouts consistently, reflecting financial health and management's confidence in future earnings.

Reviewing the Dividend Growth Rate for Colgate-Palmolive (CL) over the past 20 years, it is evident there is significant fluctuation. Values range dramatically from as low as 2.2857% to as high as 25%. However, examining the average, it has been calculated at 8.4235%. This suggests that, generally, the Dividend Growth Rate exceeds the 5% benchmark, which implies consistent and substantial dividend increases over time. This trend reflects positively on Colgate-Palmolive's commitment to returning value to shareholders even if not as high in recent years. Therefore, considering the overall growth rate above 5%, this performance is good.

Average annual Payout Ratio lower than 65% in the last 20 years?

The payout ratio is the percentage of earnings paid to shareholders in dividends. Ideally, a payout ratio below 65% is sustainable and indicates a well-managed company.

Colgate-Palmolive (CL) has an average payout ratio of 56.26% over the last 20 years. This ratio is comfortably below the 65% threshold, indicating a healthy and sustainable dividend policy. Despite fluctuations, with a notable peak of 98.59% in 2015 and a low of 35.92% in 2003, the overall trend is favorable. This trend is good as it assures that Colgate-Palmolive retains enough earnings to reinvest in the business while also rewarding its shareholders.

Dividends Well Covered by Earnings?

Dividends being covered by earnings refer to the ratio of Earning per Share (EPS) over Dividend per Share (DPS). This indicates the company's ability to sustain its dividend payouts from its earnings.

Examining the historical trend of Colgate-Palmolive's EPS and DPS, it's evident that the dividends have consistently been covered by the earnings. The ratio of earnings to dividends ranged from a low of about 0.36 in 2003 to a high of nearly 0.99 in 2015. Despite minor fluctuations, the overall trend seen here is relatively stable, indicating good health in terms of dividend coverage. Particularly, ratios above 0.5 mark from 2003 to 2019 suggest a robust buffer, meaning the company’s earnings sufficiently cover the dividends paid out annually. More recently, in 2022 and 2023, coverage ratios have further increased, reaching approximately 0.87 and 0.69 respectively—highlighting a strong ability to continue paying or possibly increasing dividends. This trend bodes well for Colgate-Palmolive, showcasing that dividend payouts are being made sustainably over time.

Dividends Well Covered by Cash Flow?

Dividends well covered by cash flow indicates whether the company generates sufficient free cash flow to cover its dividend payments. It is essential for assessing the sustainability and reliability of the dividends.

The free cash flow for Colgate-Palmolive (CL) shows substantial variability, with figures ranging from $1.4 billion to a high of $3.3 billion over the past 20 years. The dividend payout has consistently increased over the same period, from approximately $506.8 million to $1.7 billion. The ratio of dividends covered by cash flow hovers around 0.5 to 0.6 for most years, suggesting that the company generally has adequate cash flow to cover dividends. However, in recent years (2022), this ratio spiked to 0.91, indicating a strained capacity to cover dividends solely from free cash flow. This trend is somewhat concerning, as persistent high ratios may jeopardize future dividend reliability. Overall, while historical data show a generally good coverage, the recent spike necessitates monitoring.

Stable Dividends Since the Company Began Paying Dividends?

This criterion considers the stability of a company's dividend payouts over a long period. A company that maintains or grows its dividend payouts consistently is often viewed as financially healthy and shareholder-friendly. This consistency is particularly valuable for income-seeking investors who rely on dividends for regular income. Stability in dividends indicates robust earnings and reliable cash flow, key factors for long-term investment. A drop by more than 20% over 20 years would be a red flag, signaling potential instability.

Over the past two decades, Colgate-Palmolive (CL) has demonstrated remarkable stability in its dividend payments. The dividend per share has shown consistent growth from $0.45 in 2003 to $1.91 in 2023. At no point did the dividend drop by 20%, highlighting the company's reliable earnings and solid financial footing. For income investors, this trend is a very positive indicator. It means investors could count on Colgate-Palmolive to not only preserve but also gradually increase their dividend income over the years. Such a consistent track record places Colgate-Palmolive in a favorable light for those prioritizing stable income streams.

Dividends Paid for Over 25 Years?

The consistency and growth of dividends over a long period is a key indicator of a company's financial health, stability, and shareholder commitment.

Colgate-Palmolive (CL) has paid and continuously increased its dividends for over 25 years, as evidenced by the provided dividend per share data from 1998 to 2023. In 1998, the dividend per share was $0.275, and this has risen every year, reaching $1.91 in 2023. This consistent increase in dividends shows Colgate-Palmolive’s robust financial health and its commitment to returning value to shareholders. Such a trend is favorable as it reflects the company's ability to generate consistent earnings and maintain shareholder trust.

Reliable Stock Repurchases Over the Past 20 Years?

Explain the criterion for Colgate-Palmolive (CL) and why it is important to consider

Reliable stock repurchases are crucial as they signal a company’s confidence in its financial stability and future growth. By consistently reducing the number of shares outstanding, a company can increase the value of remaining shares and return capital to shareholders effectively. This practice is particularly important for a dividend-focused company, as it shows it can maintain both dividends and buybacks through various economic cycles.