Welcome to this series where I will be reviewing all the Dividend Kings and providing an overview and valuation calculation on the companies. Dividend Kings are a rare breed of Dividend Growth Companies. These companies have managed to raise their dividend for 50 or more years consecutively. Through all types of market swings, economic trouble, wars, recessions, these companies have seen it all and continue to reward shareholders with rising dividend income.
This week’s entry will focus on:
CL – Colgate-Palmolive Company
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Overview
Colgate-Palmolive Company manufactures and sells consumer products worldwide. The company offers toothpaste, toothbrushes, mouthwash, bar and liquid hand soaps, shower gels, shampoos, conditioners, deodorants and antiperspirants, skin health products, dishwashing detergents, fabric conditioners, household cleaners, pet food and other related items.
Colgate-Palmolive Company was founded in 1806 and is headquartered in New York, New York.
(Source: Company Website)
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Metrics:
Dividend Amount: $1.88
Dividend Yield: 2.45%
5 Year Dividend CAGR: 3.0%
Dividend Payout Ratio: 78.01%
Years of Dividend Increases: 59 Years – has an uninterrupted dividend since 1895
EPS: $2.41
P/E: 23.07
Analyst 5 Year Earnings Growth Estimate: 4.11%
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Valuation:
Current Price: $76.67 (5/10/22)
DCF (10% RRR): $48.15
P/E Mean Reversion:$63.41
Dividend Yield Theory: $80.34
Average of the three: $63.96
Analyst 1 year Price Target: $82.06
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Commentary:
CL is a slow growing consumer staples company providing everyday items that we all need. Most consumers and investors have heard of CL, but the biggest appeal of the company is their brands. The company brands include: Colgate, Darlie, elmex, hello, Hill’s Science Diet, 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, and Cuddly
CL is a stable investment, with a Beta of only 0.61, but the returns from the company have been lackluster for the past five plus years. The stock has provided anemic long term returns of 6.78% in price appreciation in the past 5 years compared to the S&P 500 return of 87.07%. The longer term chart is more impressive, rising 3,733% since 1985. The current dividend yield is slightly higher than the historical average and the P/E is slightly lower, so it appears the company is a reasonable buy based on those valuation criteria. However, the dividend growth is on the lower end at 3% and with the current yield in the 2.5% range, the combination of dividend and growth, as well as low capital appreciation, this company does not meet my investment criteria. The dividend history of 59 years of consecutive growth shows a stable business model.
The stock appears fully valued to overvalued at this time and waiting for a pullback may be needed before purchase. The company is stable but does not have much growth.
Disclosure: I do not own shares of CL.