Colgate-Palmolive (CL) is one of those companies you like to have in your portfolio because you pretty much know what to expect from it: a reliable, steady performer that will bounce back even if it happens to go through rough patches.
Colgate-Palmolive is set to report Q2 earnings later this month. Although CL stock has had a tough time lately, here are a few reasons why CL stock is still a winner.
CL Stock Is a Dividend King
A dividend king is a stock that has managed to increase its dividend for at least 50 consecutive years, so it’s a step above a dividend aristocrat. And it’s an exclusive club, with only 16 stocks managing to earn the title.
Colgate-Palmolive had the third-fastest growth rate out of the dividend kings over the past decade, growing its dividend at a rate of 11% per year.
Growth in Emerging Markets
CL derives more than half of its profits from emerging markets, expanding 9.5% year-over-year for Q4 2014. Compare this to growth of just 1.5% in developed markets for the same time period. The increase in revenue was primarily attributable to a rise in product prices.
The reason for the increase can be chalked up to the strong dollar compared to the weaker currencies of emerging markets. Colgate-Palmolive has said that it will continue to raise prices to offset the weakness of foreign currencies.
Most of Colgate-Palmolive’s growth is expected to come from emerging markets. CL has been in countries such as Mexico and Brazil for years, known mostly for its toothpaste products. But toothbrush and mouthwash sales have been expanding.
In addition, toothpaste sales in countries such as China, India and Russia have been growing, numbering in the billions for 2014.
CL stock benefits from the fact that items such as toothpaste, toilet paper and soap are all things that most people would say they couldn’t live without. It’s a company that’s pretty much immune to economic downturns in the long run.
Even in emerging markets such items are more and more being viewed as must-haves. No matter how bad the economy gets, people are still going to buy toothpaste and toilet paper.
Sales for Q1 2015 fell 6% year-over-year, but organic sales — excluding the effects of foreign exchange — actually increased 4%. Meanwhile, net income for the same time period was $542 million, up from $388 million from Q1 2014.
CL stock has gone through a rough patch in part due to weak currencies in emerging markets up against a strong dollar. But CL has raised prices in those markets to offset the difference and is continuing to see growth despite the price hikes.
As of this writing, Will Emerson did not hold a position in any of the aforementioned securities.