If you are interested in cashing in on Colgate-Palmolive Company's (NYSE:CL) upcoming dividend of US$0.43 per share, you only have 3 days left to buy the shares before its ex-dividend date, 17 April 2019, in time for dividends payable on the 15 May 2019. Investors looking for higher income-generating stocks to add to their portfolio should keep reading, as I take a deeper dive into Colgate-Palmolive's latest financial data to analyse its dividend attributes.
5 questions to ask before buying a dividend stock
When researching a dividend stock, I always follow the following screening criteria:
- Is their annual yield among the top 25% of dividend payers?
- Has it paid dividend every year without dramatically reducing payout in the past?
- Has the amount of dividend per share grown over the past?
- Is is able to pay the current rate of dividends from its earnings?
- Will it be able to continue to payout at the current rate in the future?
How does Colgate-Palmolive fare?
Colgate-Palmolive has a trailing twelve-month payout ratio of 60%, meaning the dividend is sufficiently covered by earnings. Going forward, analysts expect CL's payout to remain around the same level at 60% of its earnings. Assuming a constant share price, this equates to a dividend yield of 2.7%. In addition to this, EPS should increase to $2.79.
When assessing the forecast sustainability of a dividend it is also worth considering the cash flow of the business. Companies with strong cash flow can sustain a higher payout ratio, while companies with weaker cash flow generally cannot.
If dividend is a key criteria in your investment consideration, then you need to make sure the dividend stock you're eyeing out is reliable in its payments. In the case of CL it has increased its DPS from $0.88 to $1.72 in the past 10 years. During this period it has not missed a payment, as one would expect for a company increasing its dividend. This is an impressive feat, which makes CL a true dividend rockstar.
In terms of its peers, Colgate-Palmolive generates a yield of 2.5%, which is on the low-side for Household Products stocks.
Taking into account the dividend metrics, Colgate-Palmolive ticks most of the boxes as a strong dividend investment, putting it in my list of top dividend payers. Given that this is purely a dividend analysis, I urge potential investors to try and get a good understanding of the underlying business and its fundamentals before deciding on an investment. Below, I've compiled three relevant factors you should further research:
- Future Outlook: What are well-informed industry analysts predicting for CL’s future growth? Take a look at our free research report of analyst consensus for CL’s outlook.
- Valuation: What is CL worth today? Even if the stock is a cash cow, it's not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether CL is currently mispriced by the market.
- Other Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at email@example.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.