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Dividend Aristocrats In Focus: Colgate-Palmolive

Updated on March 28th, 2024 by Bob Ciura

Over time, the Dividend Aristocrats have proven to be among the best-performing dividend growth stocks in the entire market. Broadly speaking, the Dividend Aristocrats have leadership positions in their respective industries, with durable competitive advantages that allow them to generate long-term growth.

The Dividend Aristocrats are a group of 68 companies in the S&P 500 Index, with 25+ consecutive years of dividend increases.

You can download the full spreadsheet of all 68 Dividend Aristocrats, along with several important financial metrics such as price-to-earnings ratios and dividend yields, by clicking on the link below:


Disclaimer: Sure Dividend is not affiliated with S&P Global in any way. S&P Global owns and maintains The Dividend Aristocrats Index. The information in this article and downloadable spreadsheet is based on Sure Dividend’s own review, summary, and analysis of the S&P 500 Dividend Aristocrats ETF (NOBL) and other sources, and is meant to help individual investors better understand this ETF and the index upon which it is based. None of the information in this article or spreadsheet is official data from S&P Global. Consult S&P Global for official information.

A select number of Dividend Aristocrats also qualify as Dividend Kings, an even more exclusive group of 49 stocks that have raised their dividends for 50+ consecutive years.

Colgate-Palmolive (CL) is a Dividend Aristocrat and is also a Dividend King. Colgate-Palmolive’s long history of dividend increases is due to its strong brands and dominant position across multiple product categories.

Colgate-Palmolive has paid uninterrupted dividends since 1895 and has increased its dividend payments for the past 61 consecutive years.

Colgate-Palmolive stock may be trading at a premium today, but it still remains a strong holding for reliable and steady dividend growth.

Business Overview

Colgate-Palmolive traces its roots all the way back to 1806, making it one of the oldest companies in the US stock market. It was founded by William Colgate, who started a starch, soap, and candle business in New York City.

Today, the company manufactures oral care products like toothpaste, personal care products such as soap, home cleaning products, and pet food.

Major brands include Colgate, Palmolive, Hill’s Science Diet, and many more. The core segment is Oral Care, which constitutes nearly half of the company’s revenues. Colgate-Palmolive is a global giant. It sells its products in over 200 countries and territories around the world, and the company generates over $19 billion in annual sales.

Source: Investor Presentation

Colgate-Palmolive has a highly diversified business model in terms of products as well as geographic markets. Approximately half of the company’s revenue comes from emerging markets, although its reliance upon these markets for growth has waned a bit recently.

This is due to the success of the company’s pet nutrition business, as it continues to take a revenue share from other segments. Emerging markets will be a critical growth catalyst for the company moving forward. Colgate-Palmolive has the #1 position in China, with a market share above 30%.

However, the company also faces several challenges, including global supply chain issues and pronounced inflation that’s increasing costs across the board, including in raw materials and labor. These factors could keep a lid on growth going forward.

Growth Prospects

Colgate-Palmolive generally enjoys a world-class brand portfolio and high-profit margins. The company’s pet food products, in particular, are a compelling growth catalyst moving forward. Pet food is a growth industry in the U.S.

Colgate posted fourth quarter earnings on January 26th, 2024. The company posted an organic sales increase of 7% year-over-year for the quarter, which was ahead of estimates for a 6.2% gain. Africa/Euroasia led the way with a gain of 17%, and Latin America was up 16.5%. North America was +3.5% and AsiaPacific was weakest at +1.0%. Organic volume was flat while forex translation added 0.5% of growth.

Earnings-per-share came to 87 cents, which was two cents better than estimates, and up from 77 cents a year ago. Operating profit rose 14%. Europe led the way from a profit growth perspective, adding 35% year-over-year. Latin America was up 26% on strong sales gains, but Africa/Euroasia profit declined 15%.

North America saw a 19% gain in operating profit. The gains in margins were from cost savings and higher pricing, primarily. Management guided for 2024 sales growth of +1% to +4% on a reported basis, and organic sales to be +3% to +5%.

We see Colgate-Palmolive producing 8% annual earnings-per-share growth on average in the next five years.

Competitive Advantages & Recession Performance

Colgate-Palmolive has many competitive advantages which have fueled its growth over the past 200+ years.

First, it has built a dominant position in its core product categories, most notably in toothpaste, where Colgate-Palmolive’s market share has risen steadily for many years. Today, it commands a higher market share than the next three biggest competitors combined.

Such a high market share allows Colgate-Palmolive to charge higher prices for its premium products and raise prices over time. Pricing power is a critical competitive advantage for consumer goods stocks.

Another major advantage for Colgate-Palmolive is that the products the company sells are necessities of modern life. Consumers need oral, personal, and pet care products irrespective of economic conditions. Colgate-Palmolive enjoys steady demand, which gives the company consistent profitability, even during recessions.

Colgate-Palmolive’s earnings-per-share through the Great Recession are shown below:

Colgate-Palmolive generated positive earnings growth in 2008 and 2009, during the worst years of the recession. Earnings dipped slightly in 2010 but resumed growing in 2011 and thereafter.

The company’s strong performance from 2007-2010 is a credit to its strong business model and powerful brands. These same qualities helped Colgate-Palmolive remain highly profitable and raise its dividend in 2020, even with the impact of the global coronavirus pandemic.

Colgate-Palmolive’s dividend is also very safe. The company has a projected dividend payout ratio of just under 60% for fiscal 2024, which suggests that the dividend is well-covered.

Valuation & Expected Returns

With expectations of about $3.45 in earnings-per-share for 2024, Colgate-Palmolive stock has a price-to-earnings ratio of 26.1.

Our fair value estimate for CL stock is a P/E multiple of 24. Therefore, the stock appears to be slightly overvalued. A declining P/E multiple could reduce annual returns by -1.7% per year over the next five years.

In addition, CL shares have a current dividend yield of 2.2%.

Assuming the stock maintains a fairly stable valuation ahead, along with our projected earnings growth and estimated adjusted earnings-per-share for 2024, we forecast Colgate Palmolive can produce annualized total returns of approximately 8.5% through 2029.

We have assigned a hold rating to the company’s shares as a result.

Final Thoughts

Colgate-Palmolive is a high-quality business with several category-leading brands. The company has growth potential through product innovation, its Hill’s pet food brand, and growth in emerging markets.

Colgate’s dividend should remain well-covered, and so further dividend hikes in the coming years should be relatively easy.

With annual returns just below 9%, we currently rate CL stock a hold.

Looking for more dependable dividend growth stocks? The following Sure Dividend databases contain the most trustworthy dividend growers in our investment universe:

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The major domestic stock market indices are another solid resource for finding investment ideas. Sure Dividend compiles the following stock market databases and updates them monthly:

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