Colgate-Palmolive Company (NYSE:CL) is a type of business that does not often have to persuade customers to buy its products since people will brush their teeth, clean their homes, and feed their pets no matter what the state of the economy is. The company has, in fact, based its business on these daily habits through brands like Colgate, Palmolive, and Hill’s Science Diet.
Colgate therefore presents an interesting option for investors who are looking for dividends. The company has increased its dividend for many years and produces sufficient cash to make regular payments to shareholders. Yet the fact that a company is reliable does not mean that its shares are a good investment. At their present valuation, investors must go beyond the company’s good reputation and assess what they are actually paying for the stability it offers. Hedge funds think CL is a top 10 dividend king stock but, there are nine other stocks that rank higher than CL on our Dividend King’s list.
Everyday Products, Global Reach
The sales of Colgate-Palmolive Company are mainly derived from two business segments: Oral, Personal and Home Care, and Pet Nutrition. The company distributes its products worldwide via supermarkets, pharmacies, online retailers, and other distribution channels. It has a particular strength in the area of oral care. Colgate maintained its position in the toothpaste market, holding a 41.3% share during the second quarter of 2026. Its market share in the manual toothbrush sector reached 32.7% for the same period.
These figures make it clear why Colgate continues to be hard to dislodge from its current position since its products are widely available and consumers are already familiar with the brand; although a smaller competitor might provide a cheaper alternative, it would take a long time and a lot of money to achieve the same degree of recognition and distribution.
Colgate also has another asset in the field of pet nutrition, with its Hill’s Science Diet brand appealing to a market in which pet owners are not unwilling to spend a lot of money in order to keep their pets healthy and frequently choose food that is recommended by their veterinarian to meet the nutritional requirements of their animals.
This does not make the company safe from competition since customers can change brands and lower-priced products can affect sales. However, Colgate-Palmolive has established a business on products which people buy over and over again, thus having a fairly stable revenue stream.
What Investors Get From the Dividend
In September 2026, the company announced a quarterly dividend of $0.53 per share. With an annual payout of $2.12, the stock has a yield of approximately 2.5% when the price per share is $86. The company has been paying dividends without interruption since 1895 and has increased them for 63 consecutive years. That is an impressive record, but the present yield tells a more conservative tale. Read the company’s detailed dividend analysis here.
At the moment, investors are not purchasing Colgate-Palmolive in order to obtain a substantial income. What attracts them is the prospect of receiving dividends for many years, with the amount of the payout increasing over time. The company does have the cash flow to adopt that approach since operating cash flow amounted to $1.742 billion in the first six months of 2026, which gives management a good deal of scope for paying dividends and for reinvesting in the business. There is a noteworthy difference between the two payout ratios of the company: the earnings payout ratio is currently at about 84% according to recent market data, whereas the free-cash-flow payout ratio is around 44%.
The figure for earnings might at first appear uncomfortable since it shows that a large portion of the reported profits is being paid out as dividends. The free-cash-flow figure, on the other hand, gives a more reassuring impression, showing that the amount paid out as dividends represents a smaller proportion of the cash that remains after capital expenditures.
Nevertheless, investors must not ignore the earnings payout ratio; should profit growth slow down, or if operating costs go up, it might become more difficult to keep up the previous rate of dividend increases. The amount of cash generated will be a key figure to watch in the next few quarters.
The Price of Owning a Reliable Business
Although Colgate-Palmolive’s business may be predictable, its shares are by no means cheap. The stock is currently trading at about 34 times trailing earnings and 21 times forward earnings. The forward multiple provides investors with a clearer picture of how much they are paying for the company’s expected profits. The fact that CL is still selling at a substantial premium indicates that it is commanding a meaningful premium for a mature consumer goods business.
The premium reflects the qualities that investors appreciate: well-known brands, customers who make repeated purchases, and a long history of paying dividends. The issue now is how much more the company can provide in the future. Look at the earnings yield; with a forward P/E of 21 times, CL’s implied earnings yield is about 4.8%. This does not indicate that shareholders will get a 4.8% return in cash; it only shows the expected earnings as a percentage of the share price.
The figure is more useful when it is compared with Treasury and TIPS yields. If government bonds are providing competitive returns, then investors may be less inclined to pay a high multiple for a company which is expected to have earnings grow at a relatively slow rate. Compared with them, stocks which pay dependable dividends can then become more attractive when bond yields fall. In the following video you can find other stocks with reliable dividends and higher growth rates.
Colgate-Palmolive still has the possibility of rewarding its shareholders via higher earnings and by increasing its dividend. However, if the company is bought at a high price multiple, there is another risk. Even if the business carries on in a reasonable way, a fall in its valuation could wipe out some of those gains. This point is important for new investors; a good company can continue to be solid yet still produce poor stock returns if the price paid for it is too high.
Is Colgate-Palmolive a Buy?
Colgate-Palmolive has many advantages. Its brands are well established in ordinary consumer products, its cash flow enables the dividend, and its record of successive dividend increases dates back over sixty years. The downside is the price that investors have to pay for these features. A yield of 2.5% might be acceptable for someone who is putting together a long-term dividend portfolio, but it is probably not enough to meet the needs of investors who require a large amount of income right away. Also, its forward P/E ratio of about 21 times leaves little room for earnings to fall. The good news is that compared to The Procter & Gamble Company (PG) it is a cheaper investment as both companies have the same forward P/E but CL is expected to grow faster (see our PG analysis here).
Colgate-Palmolive should be included on investors’ watchlist if they place a higher value on consistency than on a high initial yield. For investors seeking a wider margin of safety, the company may become more attractive once the pullback has reduced its valuation to a level that is in better line with its growth prospects.
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This article is originally published at Insider Monkey.
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