We recently compiled a list of the 10 Dividend Zombies and Kings with Longest Dividend Payouts. In this article, we are going to take a look at where Colgate-Palmolive Company (NYSE:CL) stands against the other dividend stocks.
Last year, artificial intelligence (AI) was the main focus in the markets, driving tech stocks to the forefront. These stocks rose by nearly 56%, accounting for the majority of the market’s gains. However, these trends quickly lose popularity once they emerge. Experienced long-term investors understand a crucial principle: while chasing short-term investment trends can often lead to disappointment, committing to a long-term strategy can yield success. As AI-related companies drove the market upward, the valuations of high dividend-paying companies quietly declined in comparison. It is not about attractive valuations of dividend stocks, these stocks also offer diversification benefits and the potential for a growing income stream, especially if the Fed decides to lower interest rates, making them a strong investment option. These stocks become more attractive when companies have a solid history of consistently paying and increasing their payouts. Read our list of Best Dividend Kings to Buy for Safe Dividend Growth.
Dividend zombies are companies that have paid dividends to shareholders for at least 100 consecutive years whereas dividend kings are companies boasting 50 years of dividend growth. Dividend growers have shown strong performance over the years, often surpassing the overall market returns. The Dividend Aristocrats index, which tracks the performance of companies with 25 consecutive years or more, has outperformed the broader market since its inception in 2005, with lower levels of volatility. Historically, the index has captured 90% of the market’s upward movements while experiencing only 82% of its declines. Currently, the Aristocrats are trading at a price-to-earnings multiple that is more than 10% lower than that of the broader market. This discount level has historically preceded prolonged periods of superior performance by the Aristocrats.
Since the end of 1989, there have been six calendar years where the broader market experienced negative performance. In each of these years, the Dividend Aristocrat index surpassed the performance of the broader equity benchmark by an average of 13.28%. Remarkably, the aristocrats delivered positive total returns in three of those years.
Given investors’ preference for dividend stocks, companies listed in the broader market indices are consistently increasing and sustaining their dividend payments. In the first quarter of 2024, the S&P’s main index distributed $151.6 billion in dividends, compared to $146.8 billion in Q1 2023. There were 796 reported dividend increases in the first quarter, totaling $22.7 billion, up from $19.7 billion in the prior-year period.
The impressive returns of dividend growers clearly demonstrate their strong performance. In this article, we will take a look at dividend zombies and dividend kings to invest in.
Our Methodology:
For this list, we selected companies that have paid dividends for over 100 years and also have strong dividend growth histories. Some of these companies are dividend kings, which means that they have raised their payouts for 50 years or more. We also considered the hedge fund sentiment around each stock, according to Insider Monkey’s database for Q1 2024. The stocks are ranked in ascending order of the consecutive years of dividend payments. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here).
An array of toothpaste, toothbrushes, and mouthwashes on a bright background, highlighting the company’s oral care products.
Colgate-Palmolive Company (NYSE:CL)
Consecutive Years of Dividend Payments: 129
Colgate-Palmolive Company (NYSE:CL) ranks eighth on our list of the best dividend zombies. The company, that started a small soap and candle business, is now one of the largest manufacturing companies in the world, specializing in consumer products. Last month, Morgan Stanley released a list of companies they believe are well-positioned to withstand a weakening consumer market. The analyst at the firm highlighted companies rated as Overweight, where the market has not fully appreciated the positive strategic changes or adjustments these companies are making to handle the current consumer environment better. For Colgate-Palmolive Company (NYSE:CL), recent strategic changes, like emphasizing its e-commerce channel, are proving successful. While this improvement is somewhat reflected in the company’s valuation, we believe these strategic adjustments will drive sustained higher organic sales growth for CL compared to its peers in the long run.
In the first quarter of 2024, Colgate-Palmolive Company (NYSE:CL) reported revenue of $5.07 billion, which showed a 6.2% growth from the same period last year. The company has maintained its leadership in the toothpaste and manual toothbrushes market, holding a global market share of 41.3% and 31.7% so far this year, respectively. Its dividend payments are safe as its cash generation remains strong. The company generated over $681 million in operating cash flow and its free cash flow came in at $555 million.
Colgate-Palmolive Company (NYSE:CL) announced a quarterly dividend of $0.50 per share on June 13, which was in line with its previous dividend. Overall, it has been growing its dividends for the past 62 years and has paid dividends regularly for 129 years in a row, which makes it one of the best dividend zombies on our list. The stock has a dividend yield of 2.06%, as of June 20.
Insider Monkey’s database of Q1 2024 indicated that 50 hedge funds owned stakes in Colgate-Palmolive Company (NYSE:CL), compared with 54 in the previous quarter. These stakes are valued at over $2.1 billion in total. With over 10.5 million shares, First Eagle Investment Management was the company’s leading stakeholder in Q1.
Overall CL ranks 8th on our list of the dividend zombies and kings with longest dividend payouts. You can visit 10 Dividend Zombies and Kings with Longest Dividend Payouts to see the other dividend stocks that are on hedge funds’ radar. While we acknowledge the potential of CL as an investment, our conviction lies in the belief that deeply undervalued dividend stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for a deeply undervalued dividend stock that is as promising as CL but that trades at less than 7 times its earnings and yields nearly 10%, check out our report about the dirt cheap dividend stock.
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Disclosure: None. This article is originally published at Insider Monkey.
