We recently compiled a list of the 10 Best Diversified Dividend Stocks To Buy Now. In this article, we are going to take a look at where Colgate-Palmolive Company (NYSE:CL) stands against the other diversified dividend stocks.
In this article, we will take a look at some of the best diversified dividend stocks.
Diversified stocks refer to companies involved in multiple sectors, industries, or regions. These businesses, often large conglomerates like Warren Buffett’s Berkshire Hathaway, generate income from a variety of operations. The main goal of diversification is to lower risk by spreading investments across various areas, reducing the potential negative impact of poor performance in any one stock or sector. Nathan Wallace, principal wealth manager at Savvy Advisors, also supported the idea of diversifying portfolio. Here are some comments from the analyst:
“Through intelligent portfolio building and diversifying, investors can create a portfolio of risky assets with an aggregate volatility that is lower than any of the individual securities. The key here is to buy securities with attractive risk profiles that are not correlated to each other in a significant way with the goal that when one asset is performing poorly, another asset will pick up the slack through positive performance.”
That said, diversification doesn’t guarantee a lack of correlation between your investments. For example, owning 100 tech stocks might reduce risk compared to holding just one, but those 100 stocks are likely to be correlated with each other. To truly minimize risk, it’s important to diversify beyond just one sector. According to analysts, the higher yields on Treasury bonds could provide some protection in the event of a major stock market decline. Despite this, those who believe in diversification are facing uncertainty. US stocks continue to outperform year after year, driven by the consistent profits of American companies, making other investments seem like a path to underperformance.
On the other hand, a recent study by Preqin revealed that institutions, including pensions, endowments, and foundations, hold $21 trillion in traditional diversified strategies, as of June 2024. These strategies allocate funds across various investments such as bonds, stocks, real estate, and cash.
The year 2024 proved to be exceptional for US stocks, with the broader market rising over 23%. The Nasdaq outperformed with a nearly 29% gain, while the Nasdaq 100 rose close to 25%. These impressive gains were largely driven by the Magnificent 7 stocks, which surged by nearly 67%, along with other mega-cap companies. This marked the second consecutive year that the broader market achieved gains exceeding 20%, a feat last seen in the late 1990s.
Regardless of market conditions, investors have consistently sought comfort in dividend stocks. Among these, dividend growth stocks have gained significant interest. A report from BlackRock revealed that, over time, stocks that consistently increased or maintained their dividends have tended to perform better than those that didn’t pay dividends or cut their payouts. In times of market decline, dividend-paying stocks often offer a safeguard against fluctuating share prices. Companies that pay dividends typically aim to sustain these payments and are usually hesitant to reduce them unless it’s essential.
When considering dividend stocks, investors typically assess the dividend yield. Experts suggest targeting yields between 3% and 6%, as yields higher than this could signal potential yield traps. Brian Bollinger, president of Simply Safe Dividends, has highlighted this advice. Below are some insights from the analyst:
“I generally like to advocate for an approach of targeting great businesses that might pay closer to a 3% to 4% dividend yield.”
Our Methodology:
For this list, we scanned Insider Monkey’s database of Q3 2024 and selected conglomerate firms that specialize in several different businesses and pay regular dividends to shareholders. The list is ranked in ascending order based on the number of hedge funds having stakes in the companies.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here).
An array of toothpaste, toothbrushes, and mouthwashes on a bright background, highlighting the company’s oral care products.
Colgate-Palmolive Company (NYSE:CL)
Number of Hedge Fund Holders: 54
Colgate-Palmolive Company (NYSE:CL) is a prominent global consumer products company, recognized for its products in Oral Care, Personal Care, Home Care, and Pet Nutrition. In the past 12 months, the stock has surged by nearly 9%. Recently, the company has focused heavily on sustainability and broadening its product offerings. Its goal of making all packaging recyclable by 2025 highlights the increasing environmental concerns of consumers and regulators. Through efforts like partnering on renewable energy projects, the company is adjusting its operations to align with future market needs and regulatory standards.
In the third quarter of 2024, Colgate-Palmolive Company (NYSE:CL) reported revenues of $5.03 billion, marking a 2.4% increase compared to the same quarter last year, surpassing analysts’ expectations by $27.2 million. The company continues to dominate the toothpaste market with a 41.6% global market share year-to-date, and it remains the leader in the manual toothbrush category, holding a 32.3% global market share during the same period.
Colgate-Palmolive Company (NYSE:CL)’s financial position also remained strong in 2024, generating nearly $3 billion in operating cash flow during the first nine months of the year. This solid cash flow has allowed the company to increase its dividends for 62 consecutive years. Currently, it pays a quarterly dividend of $0.50 per share and has a dividend yield of 2.28%, as of January 22.
As per Insider Monkey’s database of Q3 2024, 54 hedge funds owned stakes in Colgate-Palmolive Company (NYSE:CL), up from 52 in the previous quarter. The overall value of these stakes is over $3.4 billion. With over 9.3 million shares, GQG Partners was the company’s leading stakeholder in Q3.
Overall CL ranks 6th on our list of the best diversified dividend stocks to buy now. While we acknowledge the potential for CL as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than CL but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
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