Colgate (CL) Enhances Shareholder Returns, Hikes Dividend
Colgate-Palmolive Company CL is
focused on boosting investor sentiment through several growth
initiatives and shareholder-friendly moves. To this end, the
company announced a 2.4% hike in its quarterly cash dividend to 43
cents per share ($1.72 annually) from 42 cents. The new dividend is
payable May 15, 2019 to shareholders on record as of Apr 19,
2019.
Colgate has always followed a disciplined capital allocation
strategy that focuses on making investments to develop business,
while returning cash to shareholder through dividend payouts and
share buybacks. The company’s strong cash generation ability has
helped it increase dividend every year since 2001.
We appreciate Colgate’s efforts to enhance long-term shareholder
value. Markedly, dividend hikes not only boost shareholder returns
but also raise market value of the stock. Through this strategy,
companies try to win investors and persuade them to either buy or
hold the scrip instead of selling it.
Apart from dividend hikes, the company is progressing well with the
Global Growth and Efficiency Program, which focuses on reducing
structural costs to boost profitability, standardizing processes to
improve decision-making procedure and increasing market share
worldwide. Meanwhile, Funding the Growth initiative mainly aims at
opening environmentally sustainable distribution centres to offer
better service besides reducing fuel and transportation costs.
These programs are expected to contribute significantly toward the
expansion of gross and operating margins in the long term.
Further, the company is on track with innovation efforts to drive
business growth. Its innovation strategy is focused on growing in
adjacent categories and product segments. In 2019, the company’s
innovation efforts will be marked by the re-launch of Colgate Total
and Hill’s Science Diet, as well as expansion of the naturals
range.
Is It All Rosy for Colgate?
Unfortunately, this Zacks Rank #4 (Sell) company is exposed to
tough operating environment due to uncertain global markets and
slowing category growth rates across some of its major markets. Raw
material cost inflation, adverse foreign currency translations and
stiff competition are other concerns.
Additionally, the company is grappling with soft
margins, mainly due to higher raw material costs. The soft margins
trend is likely to persist in 2019 as raw material expenses are
expected to increase.
Moreover, Colgate expects higher raw material costs, increase in
tax rate, and uncertainties in the global economy, currency rates
and pricing to hurt bottom lines. Management expects adjusted
earnings per share for 2019 to decline in a mid-single digit.
In the past six months, shares of this Oakland, CA-based company
have lost 3.7% against the industry’s growth of around 9%.
Stocks to Consider
Unilever N.V. UN has a long-term earnings growth rate of 6.1% and
sports a Zacks Rank #1 (Strong Buy). You can see the
complete list of today’s Zacks #1 Rank stocks here.
The Procter & Gamble Company PG has a long-term earnings growth
rate of 6.9% and a Zacks Rank #2 (Buy).
The Clorox Company CLX has a long-term earnings growth rate of 6.4%
and a Zacks Rank #2.
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Unilever NV (UN) : Free
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The Clorox Company (CLX) :
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Procter & Gamble
Company (The) (PG) : Free Stock Analysis Report
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(CL) : Free Stock Analysis Report
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