Dj Colgate-Palmolive Corporate Stock Outperforms Competitors On Strong Trading Day

Colgate-Palmolive Company CL stock is doing well on the bourses courtesy of its robust strategic efforts. Shares of this renowned consumer goods company have gained 22% in a year, outperforming the Zacks Soap and Cleaning Materials industry’s 16.4% growth and the broader Consumer Staples sector’s 9.1% rise.

The company has been gaining from pricing and productivity initiatives for a while now. Its innovation strategy and shareholder-friendly moves also bode well.

Currently priced at $91.50, Colgate stock is trading at 16.3% to its 52-week high of $109.30. However, it is trading at a 21.7% premium to its 52-week low mark.

Analyzing Colgate’s Core Strengths

Colgate’s innovation strategy concentrates on growing in adjacent categories and product segments. The company is focused on the premiumization of its Oral Care portfolio through major innovations. Backed by premium innovation, products including CO. by Colgate, Colgate Elixir toothpaste and Colgate enzyme whitening toothpaste have been performing well. Also, at-home whitening and professional whitening products bode well. Its Oral Care business has also been performing well.

Some other notable efforts include the continued expansion of the Naturals and Therapeutics divisions, as well as the Hello Products LLC buyout. CL has been seeing market share growth for its Hill’s Science Diet and Hill’s Prescription Diet across the specialty channels, driven by its science-led innovation and improved brand support. On a category basis, volume growth was led by oral care and pet nutrition in the third quarter of 2024, with the Hill’s business delivering 3.6% volume growth.

CL's Price Performance

The company has re-vamped its innovation model, leveraged global strength across price tiers and invested in marketing and capabilities, all of which contribute to solid brand health and household penetration. Colgate has been gaining from strong pricing and the benefits of funding-the-growth program and other productivity initiatives. In the most recent quarter, pricing improved 3.1% year over year, backed by positive pricing across all divisions, except for North America.

Such initiatives have been bolstering Colgate’s margins for a while. During the third quarter, adjusted gross margin expanded 270 basis points (bps), while adjusted operating profit margin increased 50 bps year over year on higher gross margin. For 2024, management forecasts gross profit margin expansion on an adjusted basis, driven by continued pricing gains, benefits from revenue-growth management initiatives and strength in the funding-the-growth program. CL expects the Base Business’ earnings per share (EPS) to increase in the band of 10-11% year over year.

Bumps in CL’s Growth Trajectory

Colgate has been witnessing inflationary pressures and a challenging macro-economic environment for quite some time now. Raw material inflation and continued rise in packaging also act as deterrents to the company’s profitability. Higher adjusted selling, general and administrative and advertising expenses are concerning.

Management expects continued advertising investment for the rest of the year, primarily focused on brand building and scaling capabilities. It anticipates higher advertising costs for 2024, both on a dollar basis and as a percentage of sales.

Unfavorable foreign currency fluctuations are also hurting the company’s performance. In the reported quarter, currency negatively impacted sales growth by 4.4%. Currency translations were mainly hurt by Argentina and several countries in the Africa/Eurasia division. Sales view for 2024 includes a mid-single-digit negative impact of currency.

Final Words on Colgate

CL’s pricing and productivity initiatives are likely to address cost issues ahead. Colgate also remains committed to rewarding shareholders with share buybacks and dividend payouts. On an annualized basis, the dividend rate is $2.00 per share, up from $1.92 paid previously. Markedly, the company has paid uninterrupted dividends since 1895.

Analysts seem quite optimistic about the company. The Zacks Consensus Estimate for CL’s 2024 EPS has inched up 0.6% in the past 30 days to $3.59. The consensus mark for sales and EPS indicates 3.9% and 11.2% year-over-year increase, respectively. Colgate currently carries a Zacks Rank #3 (Hold).

Stocks to Consider

Freshpet, Inc. FRPT, a pet food company, has a trailing four-quarter average earnings surprise of 144.5%. FRPT currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Freshpet’s current financial-year sales and EPS indicates growth of 27.3% and 224.3%, respectively, from the prior-year levels.

Vital Farms VITL, which provides pasture-raised products, currently carries a Zacks Rank #2 (Buy). The consensus estimate for Vital Farms’ current financial-year sales and EPS indicates growth of 27.1% and 88.1%, respectively, from the prior-year levels.

VITL has a trailing four-quarter average earnings surprise of 48.5%.

McCormick & Company MKC, manufacturer and distributor of spices, seasonings, specialty foods and flavors, currently carries a Zacks Rank of 2. MKC has a trailing four-quarter average earnings surprise of 13.8%.

The Zacks Consensus Estimate for MKC’s current financial-year sales and EPS indicates growth of 0.6% and 8.2%, respectively, from the year-ago figures.

Zacks Investment Research

Dividend Kings—stocks that have increased dividends for over 50 years—are rare. Out of the thousands of companies listed on the NYSE, Nasdaq, and other markets, less than 70 companies hold the title. Each company has demonstrated the capacity to weather economic storms, global technological upheaval, and mercurial consumer requirements, and each has earned their top spots in their respective sectors.

However, for retail investors who want to invest in Dividend Kings, buying 70+ stocks for their income portfolio is often out of the question. You can cut down the list by yields, sector quality, maturity, global footprint, etc, to get your perfect set of Dividend Kings.

Now, though, I prefer a slightly different criteria: Dividend Kings, which are trading at steep discounts.

So, let’s take a look at the top discounted Dividend Kings today.

How I Came Up With The Following Stocks

First, I started with Barchart’s Stock Screener feature. From there, I selected the following filters to get my list of Dividend Kings:

• 14-Day Relative Strength Index: Less than 30%. RSI, or the relative strength index, is a popular technical analysis tool that indicates whether a stock is oversold or overbought based on its recent price movements across a 100-point scale. Seventy and above indicates overbought, and 30 below means oversold. Since I’m aiming for cheap Dividend Kings, I’ll set this to 30 and below.
• Current Analyst Rating: 3.5 to 5 (Moderate Buy to Strong Buy)
• Annual Dividend Yield: Left blank.
• Watchlist: Kings. This filter allows me to access my pre-set watchlists and screen them at any time.

Using this set of filters, I got three results, which I arranged from highest to lowest dividend yield.

So, let’s start with number one:

Coca-Cola Company

The Coca-Cola Company is an American multinational corporation best known for its flagship product, Coca-Cola, and its vast beverage portfolio, which includes not only sodas but also water, sports drinks, teas, and coffee brands. Some well-known brands under its umbrella are Sprite, Fanta, Dasani, Minute Maid, and Powerade.

The Coca-Cola Company also enjoys a reputation for being a reliable dividend stock. Indeed, it enjoys being a Dividend Aristocrat, Dividend King, and Dividend Zombie (100+ years of consistent dividend payments).

KO stock’s current RSI is 25.34%—the lowest on this list—making it an attractive buy for those looking for cheap Dividend Kings. Based on its $1.94 annual dividend, it also has the highest yield on this list at 2.98%. If that’s not enough incentive to buy, analysts rate KO stock a strong buy recommendation.

Colgate-Palmolive Company

Colgate-Palmolive is a consumer and household products company that manufactures and sells oral, personal, home care, and pet nutrition products under the names Colgate, Emex, and Meridol. The company also produces soaps, deodorants, dishwashing liquids, and household cleaning products under various brands, including Palmolive, Speed Stick, Softsoap, and Ajax.

Colgate-Palmolive pays $2.00 per share in dividends (annually), which reflects a 2.14% yield on CL stock’s last trading price. Its current 14-RSI is 26.80%, though admittedly, Colgate-Palmolive has the lowest analyst score on this list at 3.96 (moderate buy). Even with this rating, Colgate-Palmolive is a reliable income investment; it has paid dividends since 1895 and has increased them for 60 consecutive years.

Tennant Company

Tennant Company manufactures cleaning equipment and solutions for commercial and industrial floor care products. Its product line includes a wide range of cleaning machines, such as floor scrubbers, sweepers, carpet extractors, and burnishers, as well as cleaning chemicals and coatings designed to enhance floor durability and appearance. Tennant is an undeniable leader in the field of cleaning and is a trusted brand by businesses and consumers.

TNC stock is hovering just above its current 52-week low at $81.81, and its 14-day RSI is currently at 26.26%. Though it’s still too early to tell with 100% certainty, buyers appear to be nibbling on TNC stock, which could potentially lead to a recovery over the short term.

Meanwhile, Tennant Company pays a $1.12 annual dividend, which translates to a 1.34% yield based on the stock’s latest trading price.

Final Thoughts

These cheap dividend kings offer reliable income and potential capital appreciation in one swoop—like having your cake and eating it, too. However, markets change, and things can turn around at the snap of a finger. So, consider these three additions to your portfolio, BUT don’t neglect to watch your portfolio and the ever-needed due diligence. Remember, it’s your money on the line.

On the date of publication, Rick Orford did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.