Colgate-Palmolive (CL) Stock Analysis
Colgate-Palmolive (CL) has paid a dividend since 1895 and increased its dividend for 53 consecutive years; qualifying the company as a Dividend King, Dividend Aristocrat, and Dividend Champion.
Current Dividend: $1.60
Dividend Yield: 2.1%
Cash Dividend Payout Ratio: 58%
Market Capitalization: 67 B
Enterprise Value: 72 B
Sector: Consumer Defensive
Industry: Household & Personal Products
Colgate-Palmolive is a global consumer products company whose products can be found in 223 countries; almost evenly split between developed markets and emerging markets. The company operates in four core categories: Oral Care, Personal Care, Home Care, and Pet Nutrition.
Colgate has built the #1 market share worldwide by being the most recommended brand by dental professionals. Colgate toothpaste holds an astounding 44% share of the global market with the nearest competitor at 14%.
Personal Care products include Palmolive, Portex, and Softsoap brands of liquid hand soap (#1 in worldwide market share); Palmolive, Sanex, and Softsoap brand shower gels; Palmolive, Irish Spring, and Protex soaps, Speed Stick, Lady Speed Stick, Sanex deodorants and antiperspirants.
Home Care products include Palmolive and Ajax dishwashing liquids, Fabuloso and Ajax cleaners, and Murphy’s Oil Soap. Other trademarks owned by Colgate are Sorriso, Kolynos, Tom’s of Maine, Soupline, and Suavitel.
Colgate-Palmolive has the #1 market share in vet clinics. Their strategy of building relationships and credibility have build an economic moat for their products. Under Hill’s Pet Nutrition division they offer the brands Science Diet, Ideal Balance, Prescription Diet, and Healthy Advantage.
SWOT Analysis For Colgate-Palmolive
Colgate-Palmolive has been an unbelievably consistent grower over many decades. Its worldwide dominance in the oral care market share means its economic moat is deep and wide. Its successful model of developing partnerships with dentists widens that moat.
The company’s ability to build brands may be unmatched. Powerful integrated marketing communication has built a strong connection between brands and customers throughout much of the globe. Record gross margins exceeded 60% in 2016; impressive to say the least.
Since 80% of Colgate-Palmolive revenues are outside of North America, they are vulnerable to the effects of a rising dollar, foreign competitors who might squeeze high gross margins, and extraordinary events such as war or local uprisings.
Innovation that produces new products can be introduced with the power of the Colgate-Palmolive distribution system and advertising muscle.
High margins invite competition. While there might not be a global entity to challenge Colgate-Palmolive, they are confronted by numerous local or regional competitors all around the world.
Dividend Analyzer Checklist
(updated February 2017)
Dividend Safety Score (15/33 points)
Dividend Per Share (ttm): $1.55
Dividend Payout Ratio (ttm): 110%
Dividend Per Share (10 Year Growth): 10.5%
Cash From Operations (CFO) Per Share (ttm): $3.50
CFO Dividend Coverage (CFO / DPS): 2.3 (2/6 points)
Free Cash Flow (FCF) Per Share (ttm): $2.84
FCF Dividend Coverage (FCF / DPS): (4/6 points)
Net Financial Debt: $5225 M
Total Assets: $12623 M
Net Financial Debt / Total Assets: 41% (3/12 points)
Net Financial Debt to EBITDA (ttm): 201%
Total Liabilities to Assets Ratio (Qtr.): 101%
Piotroski Score (1-9) (TTM): (6/9 points)
Profitability & Growth Score (20/33 points)
Revenue (10 Year Growth) *CAGR > 4.14%: 3.5% (0/4 points)
EPS Basic Cont. Operations (10 Year Growth) CAGR > 4.14%: 1.9% (0/4 points)
Cash From Operations (10 Year Growth) CAGR > 4.14%: 5.2% (6/6 points)
Operating Earnings Yield (ttm): 6.2% (2/7 points)
Net Income (ttm): $1377 M
Gross Profit (ttm): $9169 M
Total Assets: $12623 M
Gross Profitability Ratio = GP / Total Assets: 73% (12/12 points)
Cash Return On Invested Capital (CROIC)(tttm): 38%
Return on Invested Capital (ROIC): 20%
Return on Invested Capital (ROIC) (5 Year Median): 30%
Return on Invested Capital (ROIC) (10 Year Median): 32%
Valuation Score (13/34 points)
Free Cash Flow Yield (ttm): 4.1% (5/9 points)
EV to EBIT (ttm): 17.3 (4/9 points)
EV to EBITDA (ttm): 15.5 (3/9 points)
PE10: 31.4 (1/7 points)
Price to Sales Ratio (ttm): 3.8
Price to Book Value (ttm): n/a
Price to Earnings Ratio (P/E) (ttm): 42.7
TOTAL POINTS – (48/100) (50 is an average score)
*Compound Annual Growth Rate (CAGR)
**A Compound Annual Growth Rate of 4.14% = a 50% gain over 10 years.
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(updated February 2017)
Colgate-Palmolive (CL) is ranked #127 (out of 257) overall and #19 (out of 33) in the Consumer Defensive sector.
Company profitability is stellar, but growth is weak. You pay a very high price for consistency; too high a price in my opinion! The dividend safety analysis indicates that, if it were not for their historic consistency, leverage and below average cash flow from operations t0 dividends would be cause for concern.
Colgate-Palmolive is the kind of company you want to buy when everyone hates stocks in general (i.e. 2009). The current valuation indicates investors are paying a large premium for past growth and consistency. The company stock is fully valued or worse at current prices.
Type of Investor / Recommendation
Large Diversified Dividend Portfolios / Watchlist
Looking For Exposure to Consumer Defensive Sector / AVOID
Deep Value Investors / AVOID
Portfolio Position Disclosures:
DVB Foundation Portfolio: None
DVB Dividend Growth: None
DVB High Income: None
Arbor Asset Allocation Model Portfolio (AAAMP): None
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