Colgate-Palmolive Company: CL Stock a Dividend King and Recession-Proof Investment
July 28, 2017
CL Stock Continues to Reward Shareholders with Its Solid Business
The major indices in the U.S. are making new all-time highs on an almost weekly basis. This is concerning for investors because if the economy turns negative, investments would be purchased at a high. If this happens, it could take years for the price of the investment to recover to the price that the shares were acquired at.
Why not look at an investment that performs well in both down and up economies? This means continued revenue and earnings in any type of economic environment.
This is why large-cap growth consumer staple company Colgate-Palmolive Company (NYSE:CL) is worth consideration. Colgate-Palmolive has been in business for more than 200 years, surviving many different economic downturns, including the Great Depression and the financial crisis in 2008. In fact, during the most recent recession, top-line revenue actually grew compared to the previous year.
Why is CL Stock Recession-Proof?
Colgate-Palmolive should be familiar to most people, with brands such as “Irish Spring,” “Ajax,” and of course its namesakes under its banner. Products range from oral and personal care to home care to pet food. Most importantly, many of the company’s goods are very essential to everyday living, regardless of the performance of the economy. This includes products such as toothbrushes, soap, shampoo, and shaving products.
Continued growth in the revenue is in part because the business has maintained its margins. This is due to additional costs like transportation and packaging getting passed along to customers, even as those costs; in other words, CL stock is protected from inflation. This, of course, leaves more money to be put towards the dividend and/or other interests.
It also helps that the company’s revenue is generated from more than 200 countries, with the majority of profits coming from North and South America and Europe. A key advantage of having a global reach is that if one country or region saw negative growth, there are plenty of others that can experience positive growth to offset it.
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Get Paid By a Global Giant
CL stock pays out a quarterly dividend (February, May, August, and October), with a current payout of $0.40 per share. The dividend yield is 2.19% which is slightly higher than the average yield seen on the markets.
Colgate-Palmolive is not only recession-proof, but a “dividend king” as well. This title is given to businesses that have seen at least 50 straight years dividend hikes; CL stock’s streak is currently 53 years, and is likely to hit 54 and beyond. One reason, of course, is the stock’s reliable and expected revenue. Another is its conservative payout ratio, with $0.55 given to shareholders for ever dollar of earnings. The remaining funds then are reinvested back into the business. For these reasons, CL shareholders get access to an investment which offers both growth and income from a large-cap blue-chip company.
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The Bottom Line on CL Stock
Rather than chasing a stock where you don’t know where the revenue and earnings will be in the future, it is best to consider an investment in a business like Colgate-Palmolive Company, which has consistent growth.
Many times, investors believe investing in the stock market is very complicated and only companies with the latest gadgets or technology are worth owning. But based on the most famous and successful investors, all you need to do is own high-quality, shareholder-friendly companies. Colgate-Palmolive is one such company, with no need to guess what lies ahead because of its history and simplicity. In 10 years time, the company will likely still be selling the same products with the same level of success.
