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Colgate (CL) Enhances Shareholder Returns, Hikes Dividend

Colgate-Palmolive Company CL is focused on boosting investor sentiment through several growth initiatives and shareholder-friendly moves. To this end, the company announced a 2.4% hike in its quarterly cash dividend to 43 cents per share ($1.72 annually) from 42 cents. The new dividend is payable May 15, 2019 to shareholders on record as of Apr 19, 2019.

Colgate has always followed a disciplined capital allocation strategy that focuses on making investments to develop business, while returning cash to shareholder through dividend payouts and share buybacks. The company’s strong cash generation ability has helped it increase dividend every year since 2001.

We appreciate Colgate’s efforts to enhance long-term shareholder value. Markedly, dividend hikes not only boost shareholder returns but also raise market value of the stock. Through this strategy, companies try to win investors and persuade them to either buy or hold the scrip instead of selling it.

Apart from dividend hikes, the company is progressing well with the Global Growth and Efficiency Program, which focuses on reducing structural costs to boost profitability, standardizing processes to improve decision-making procedure and increasing market share worldwide. Meanwhile, Funding the Growth initiative mainly aims at opening environmentally sustainable distribution centres to offer better service besides reducing fuel and transportation costs. These programs are expected to contribute significantly toward the expansion of gross and operating margins in the long term.

Further, the company is on track with innovation efforts to drive business growth. Its innovation strategy is focused on growing in adjacent categories and product segments. In 2019, the company’s innovation efforts will be marked by the re-launch of Colgate Total and Hill’s Science Diet, as well as expansion of the naturals range.

Is It All Rosy for Colgate?

Unfortunately, this Zacks Rank #4 (Sell) company is exposed to tough operating environment due to uncertain global markets and slowing category growth rates across some of its major markets. Raw material cost inflation, adverse foreign currency translations and stiff competition are other concerns.


Additionally, the company is grappling with soft margins, mainly due to higher raw material costs. The soft margins trend is likely to persist in 2019 as raw material expenses are expected to increase.

Moreover, Colgate expects higher raw material costs, increase in tax rate, and uncertainties in the global economy, currency rates and pricing to hurt bottom lines. Management expects adjusted earnings per share for 2019 to decline in a mid-single digit.

In the past six months, shares of this Oakland, CA-based company have lost 3.7% against the industry’s growth of around 9%.

Stocks to Consider

Unilever N.V. UN has a long-term earnings growth rate of 6.1% and sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Procter & Gamble Company PG has a long-term earnings growth rate of 6.9% and a Zacks Rank #2 (Buy).

The Clorox Company CLX has a long-term earnings growth rate of 6.4% and a Zacks Rank #2.

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