When I last analyzed the company several weeks ago, I found it to be overvalued. At this stage, I would be reluctant to add to my position in the stock, unless of course it declines from here. It is selling for 26.80 times earnings, and yields 2.30% based on the new dividend.
The latest dividend increase is the slowest since 1980, when the company increased distributions by a mere 3.67%. The company also raised distributions by a mere 6.90% in 2012, but this was followed by a 9.70% increase in the following year.
Year
|
Quarterly
Dividend
|
Raise
|
2014
|
$ 0.3600
|
5.88%
|
2013
|
$
0.3400
|
9.68%
|
2012
|
$
0.3100
|
6.90%
|
2011
|
$
0.2900
|
9.43%
|
2010
|
$
0.2650
|
20.45%
|
2009
|
$
0.2200
|
10.00%
|
2008
|
$
0.2000
|
11.11%
|
2007
|
$
0.1800
|
12.50%
|
2006
|
$
0.1600
|
10.34%
|
2005
|
$
0.1450
|
20.83%
|
2003
|
$
0.1200
|
33.33%
|
2001
|
$
0.0900
|
13.92%
|
1999
|
$
0.0790
|
14.91%
|
1997
|
$
0.06875
|
17.02%
|
1995
|
$
0.05875
|
14.63%
|
1994
|
$
0.05125
|
13.89%
|
1993
|
$
0.04500
|
16.13%
|
1992
|
$
0.03875
|
16.96%
|
1991
|
$
0.03313
|
17.77%
|
1989
|
$
0.02813
|
21.67%
|
1987
|
$
0.02312
|
8.80%
|
1985
|
$
0.02125
|
6.25%
|
1983
|
$
0.02000
|
6.67%
|
1981
|
$
0.01875
|
7.14%
|
1980
|
$
0.01750
|
3.67%
|
1979
|
$
0.01688
|
8.07%
|
1977
|
$
0.01562
|
13.60%
|
I obtained the data for the table below from Yahoo! Finance. It shows dividend payments in the year they were increased, and the percentage increase from the previous payment.
On a completely unrelated note, did you know that an investment in 1985 would be generating an yield on cost of 99% today? I used Yahoo! Finance data again, but double checked the yields against my manuals from the time, because the 1985 current yields seemed a little high. However, it seems like Colgate was yielding a lot at the time, but you also need to remember that long-term Treasuries yielded close to 10% as well. That definitely shows that picking a company with a high current yield that can grow distributions over time at a double digit rate can result in some tremendous compounding of income and invested capital.
|
Year
|
DPS
|
Price
|
Yield
|
YOC
|
|
2014
|
$ 1.420
|
$ 63.380
|
2.24%
|
99.17%
|
|
2013
|
$ 1.330
|
$ 65.210
|
2.04%
|
92.89%
|
|
2012
|
$ 1.220
|
$ 52.270
|
2.33%
|
85.20%
|
|
2011
|
$ 1.135
|
$ 46.195
|
2.46%
|
79.27%
|
|
2010
|
$ 1.015
|
$ 40.185
|
2.53%
|
70.89%
|
|
2009
|
$ 0.860
|
$ 41.075
|
2.09%
|
60.06%
|
|
2008
|
$ 0.780
|
$ 34.270
|
2.28%
|
54.47%
|
|
2007
|
$ 0.700
|
$ 38.980
|
1.80%
|
48.89%
|
|
2006
|
$ 0.625
|
$ 32.620
|
1.92%
|
43.65%
|
|
2005
|
$ 0.555
|
$ 27.425
|
2.02%
|
38.76%
|
|
2004
|
$ 0.480
|
$ 25.580
|
1.88%
|
33.52%
|
|
2003
|
$ 0.450
|
$ 25.025
|
1.80%
|
31.43%
|
|
2002
|
$ 0.360
|
$ 26.215
|
1.37%
|
25.14%
|
|
2001
|
$ 0.338
|
$ 28.875
|
1.17%
|
23.61%
|
|
2000
|
$ 0.316
|
$ 32.275
|
0.98%
|
22.07%
|
|
1999
|
$ 0.296
|
$ 32.415
|
0.91%
|
20.64%
|
|
1998
|
$ 0.275
|
$ 22.878
|
1.20%
|
19.21%
|
|
1997
|
$ 0.265
|
$ 17.870
|
1.48%
|
18.51%
|
|
1996
|
$ 0.235
|
$ 11.021
|
2.13%
|
16.41%
|
|
1995
|
$ 0.220
|
$ 8.196
|
2.68%
|
15.36%
|
|
1994
|
$ 0.1925
|
$ 7.199
|
2.67%
|
13.44%
|
|
1993
|
$ 0.1675
|
$ 6.898
|
2.43%
|
11.70%
|
|
1992
|
$ 0.1438
|
$ 6.019
|
2.39%
|
10.04%
|
|
1991
|
$ 0.1275
|
$ 5.160
|
2.47%
|
8.91%
|
|
1990
|
$ 0.1125
|
$ 3.794
|
2.97%
|
7.86%
|
|
1989
|
$ 0.0975
|
$ 3.176
|
3.07%
|
6.81%
|
|
1988
|
$ 0.0925
|
$ 2.282
|
4.05%
|
6.46%
|
|
1987
|
$ 0.0869
|
$ 1.8400
|
4.72%
|
6.07%
|
|
1986
|
$ 0.0850
|
$ 1.8550
|
4.58%
|
5.94%
|
|
1985
|
$ 0.0813
|
$ 1.4319
|
5.67%
|
5.67%
|
The company earned $2.38/share in 2013, and is expected to earn $3.01 in 2014 and $3.32 in 2015. However, I believe that dividend increases are decisions by the Board of Directors, which show their expectations for profit growth in the next 1 – 2 years. The decrease in dividend growth shows that management does not expect double digit earnings increases in the near term. I do think that this is a temporary situation however, and the Board will increase distributions by close to 8-9%/year over the next 5 – 10 years. The company still has strong competitive advantages, pricing power and a portfolio of branded products, which consumers buy regularly for decades.
That being said, I would hold on to my existing Colgate – Palmolive shares but would probably allocate my dividends elsewhere, where I can find better values for my money.
Full Disclosure: Long CL
Relevant Articles:
- How to read my weekly dividend increase reports
- Colgate-Palmolive (CL) Dividend Stock Analysis
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