Colgate Lifts Dividend; Issues New Share Buyback Program - Analyst Blog

To board of directors of Colgate-Palmolive Co. ( CL ) has again hiked dividend while issuing a new stock buyback plan. With this, the company maintains its history of rewarding shareholders.

The company hiked its quarterly dividend by 6% to 38 cents from 36 cents per share, effective from the second quarter of fiscal 2015. This brings the yearly dividend to $1.52 per share, reflecting a dividend yield of nearly 2.2% based on the increased dividend and last closing stock price of $70.21. The new dividend will be paid on May 15, 2015 to shareholders of record as of Apr 23, 2015.

Colgate-Palmolive has a history of paying regular quarterly dividends since 1895, which clearly reflects its strong fundamentals. Since then, the company has paid dividends every quarter, even amid economic crises like the Great Depression of the 1930s, stagflation in the 1970s and the recession of 2008. Apart from paying regular dividends, the company has focused on increasing its dividend rate every year for about 51 years.

Dividend hike is frequent among companies with a stable cash position and healthy cash flows. Other than Colgate-Palmolive, companies that recently increased their dividends are Newell Rubbermaid Inc. ( NWL ) and Nordstrom Inc. ( JWN ), which have raised their dividends by 12% to 19 cents and 12% to 37 cents per share, respectively. Another company, DSW Inc. ( DSW ) recently increased its quarterly dividend by 6.7% to 20 cents per share.

The company also rewarded its investors by approving a new share repurchase program worth $5 billion, replacing the prior program approved in Sep 2011. The company expects the program to extend through three to four years. Colgate-Palmolive has 907 million shares of common stock outstanding, which can be purchased through open market or negotiated transactions.

The strength of Colgate-Palmolive's business model is reflected in its strong cash generation capabilities and commitment to return value to shareholders. The company's strong balance sheet and cash flows provide it with the financial flexibility to make shareholder-friendly moves.

We believe that dividend hikes not only enhance shareholders' return but raise the market value of the stock as well. Through these dividend increases and share buybacks, companies persuade investors to either buy or hold the scrip instead of selling it. Currently, Colgate-Palmolive has a Zacks Rank #3 (Hold).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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