Why Colgate-Palmolive is a retiree’s dream stock
Colgate-Palmolive (CL -0.43%) has built a business over the centuries that is essential to the daily lives of virtually every consumer. Toothpaste and dish soap make up the lion’s share of its business, and focusing on personal care products ensures that even in the worst economic conditions, people will still turn to its brands.
The company continues to expand its global footprint and in fact derives three-quarters of its revenue from emerging markets, which could be considered one of the few risks associated with investing in its shares, although it also presents a world of opportunities to cash in on rising levels of disposable income.
Coupled with an enviable track record of sharing its success in returning shareholder value, it’s easy to see why Colgate stock fits into a dream retirement portfolio.
Let’s put it aside at the top: Even Colgate-Palmolive isn’t immune to the COVID-19 pandemic, which really isn’t surprising given its global footprint and the fact that the coronavirus is a global crisis. When the company released its first-quarter results in May, it withdrew its full-year guidance, as many companies have done, due to the uncertainty created by the virus outbreak.
Yet it still beat Wall Street expectations, with sales rising 5.5% and profits jumping 28%, despite much of the world being crippled by the pandemic long before it hit. be declared. This underscores the resilience of Colgate’s brands and their #1 or #2 position in most markets around the world.
The business could experience some softness in the next quarter or two as everyone became prepper when the pandemic hit and stocked up on basics, but it’s comforting to know that in times of crisis, Colgate is a brand consumers turn to first.
A look to the future
There’s a conga line of companies jumping on the cannabis bandwagon, and while it smacks of FOMO, there’s a reason for the excitement: it’s a nascent industry with huge potential.
Colgate-Palmolive is obliquely taking part in the trend, having acquired oral care specialist Hello Products, a brand aimed at young people that is launching a range of hemp-derived cannabidiol (CBD) products including mouthwashes, toothpaste and lip balm. They won’t replace its own Colgate brand, but it does give the consumer products giant a prime route to trending products.
Share the wealth
Perhaps the biggest reason retirees (and other investors) turn to Colgate is its dividend. Founded in 1806, it began paying a dividend in 1895, meaning the uninterrupted stream of shareholder income has been around longer than almost any other company in the market, let alone the investors themselves.
Colgate then began steadily increasing the payout each year beginning in 1963, for nearly 60 years, making it a member of that rarefied group of stocks known as the Dividend Kings.
This triple play makes it particularly attractive for investors looking for income. It generates consistently high levels of free cash flow, ensuring that the dividend can continue to be paid. Currently, the dividend is paying 2.5% per year, and with a payout ratio of around 52%, Colgate should have little difficulty continuing to make the payment.
A good night’s sleep
Retirees consider Colgate-Palmolive because it offers a defensive position in turmoil; sells compelling brands; on a massive and global scale; and offers benefits unavailable to many competitors.
With a dividend payout record that spans centuries and a history of payout increases that spans decades, owning these stocks could help all investors sleep soundly.