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Dividend Aristocrats Part 41: Colgate-Palmolive Company (CL)

Colgate-Palmolive Company (NYSE:CL) is the global leader in toothpaste and manual toothbrushes. Colgate-Palmolive was founded in 1806 and has increased its dividend payments every year for 52 years.

This makes Colgate-Palmolive one of only 17 Dividend Kings – stocks with 50+ years of dividend increases.

Colgate-Palmolive has long focused on international expansion. The company generates around two-thirds of its operating profit outside North America.

In addition to its long dividend streak and aggressive international expansion, the company also has an enviable track record of rising operating income that highlights the company’s long term success:

CL Operating Profit
Source: 2015 Consumer’s Staple Conference, slide 10

Among the smart money investors, Colgate-Palmolive is not a very popular stock. Moreover, among the funds we track at Insider Monkey, the stock registered a decline in popularity with 31 funds reporting long positions as of the end of September, versus 35 funds a quarter earlier. Moreover, the funds from our database held 3.20% of Colgate-Palmolive’s outstanding stock at the end of the third quarter, while Jim Simons’ Renaissance Technologies was the largest shareholder, owning some 11.44 million shares.

Business Overview

Colgate-Palmolive operates in 2 business segments:

– Oral, Personal, and Home Care

– Pet Nutrition

The Pet Nutrition segment has generated 13% of operating profit for Colgate-Palmolive through the first 9 months of the company’s fiscal 2015. The segment’s main brand is Hill’s.

The Oral, Personal, and Home Care segment has generated 87% of the company’s sales and operating profits through the first 9 months of fiscal 2015. The segment sells well known consumer brand products including Colgate, Palmolive, SpeedStick, SoftSoap, Suavatel, Tom’s of Maine, and Ajax (among others).

Colgate-Palmolive divides its Oral, Personal, and Home Care segment into 5 geographic divisions. Each division’s percentage of the segment’s total operating profit through the first 9 months of fiscal 2015 is shown below to illustrate the global diversity of Colgate-Palmolive:

– Europe/South Pacific generated 20% of segment operating income

– North America generated 24% of segment operating income

– Latin America generated 32% of segment operating income

– Africa/Eurasia generated 4% of segment operating income

– Asia generated 20% of segment operating income

Interestingly, Colgate-Palmolive sells more non-pet consumer products in Latin America than in North America.

Colgate-Palmolive’s Dividend History

As mentioned above, Colgate-Palmolive has increased its dividend payments for 52 consecutive years.

The image below shows the stable growth in the company’s dividend payments:

CL Dividend History

Over the last decade, Colgate-Palmolive has increased its dividend payments by a compound rate of 10.1%. The company’s most recent dividend increase was for 5.6%. Colgate-Palmolive will likely raise its dividend again for its April 2016 payment.

Colgate-Palmolive stock currently offers investors a dividend yield of 2.4%, which is 0.3 percentage points above the S&P 500’s dividend yield of 2.1%. The company’s stock’s median dividend yield since 1977 is 2.4% as well.

Colgate Palmolive’s historical dividend yield is shown below.

CL Dividend Yield History

The stock has traded for a yield of between ~1% and ~3% since the mid 1990’s.

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