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The 5 Safest Dividend Stocks Part 4: Colgate-Palmolive
04/02/2020 5:00 am EST
In this 5-part series, we selected the five safest dividend stocks around — each a Dividend Aristocrat with 25+ years of consecutive dividend increases, notes income expert Ben Reynolds, editor of Sure Dividend.
The Dividend Aristocrats are a group of 64 stocks in the S&P 500 Index, that have each increased their dividends for 25 years in a row or longer. Another attractive quality of our top five safest dividend stocks is that they managed to outperform the S&P 500 during both The Great Recession and the recent Coronavirus Crisis.
The next stock in the five-part series is Colgate-Palmolive (CL). Colgate-Palmolive has been in business for over 200 years, a very long operating history that has included multiple recessions. The company has survived for so long by building a portfolio of leading products which continue to see strong demand each year, even during economic downturns.
Colgate-Palmolive operates in many consumer staple markets including Oral Care, Personal Care, Home Care, and more recently, Pet Nutrition. Some of the company’s core brands include Colgate, Palmolive, Irish Spring, Protex, Softsoap, Tom’s of Maine, Ajax, and Hill’s.
These are products that see steady buying regardless of the economy. Even in the recent coronavirus crisis, consumers still need soap, toothpaste, and pet food, which bodes very well for Colgate-Palmolive.
In all, the company generates more than $16 billion in annual revenue. Colgate-Palmolive reported Q4 and full-year earnings on January 31st and results beat expectations for both revenue and profit. Diluted earnings-per-share increased 7% for the fourth quarter to $0.75. On an adjusted basis, which excludes certain costs and gains, earnings-per-share declined 1%.
However, Colgate-Palmolive continues to perform well on the top line. Organic sales rose 5% in the most recent quarter, thanks to all of its regions outside of North America posting gains of at least 6%.
While North America organic sales increased 1.5% in the fourth quarter, the international markets propelled Colgate-Palmolive’s growth. The company enjoyed margin expansion as well, the result of a significant cost-savings program. Excluding one-time charges, gross margins expanded 80 bps year-over-year to 60.2%.
Colgate-Palmolive’s strong profit margins and consistent growth over the years has fueled its impressive dividend history. It has paid uninterrupted dividends on its common stock since 1895, and has increased payments to common shareholders every year for the past 57 years.
Its most recent dividend increase was a 2.3% raise in March 2020. The stock has a solid dividend yield of 2.7% currently, which is slightly higher than the average yield of the S&P 500 Index.
Colgate-Palmolive should fare much better than many other companies in the event of a coronavirus-related economic downturn. Consumer products such as soap and toothpaste will hold up very well, even in a severe recession. With an above-market dividend yield and a long history of dividend growth, Colgate-Palmolive is a dividend stock to hold during a recession.
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