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Colgate-Palmolive (CL) is a Top Dividend Stock Right Now: Should You Buy?

Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. However, when you're an income investor, your primary focus is generating consistent cash flow from each of your liquid investments.

Cash flow can come from bond interest, interest from other types of investments, and of course, dividends. A dividend is the distribution of a company's earnings paid out to shareholders; it's often viewed by its dividend yield, a metric that measures a dividend as a percent of the current stock price. Many academic studies show that dividends account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.

Colgate-Palmolive in Focus

Colgate-Palmolive (CL) is headquartered in New York, and is in the Consumer Staples sector. The stock has seen a price change of 8.92% since the start of the year. The consumer products maker is paying out a dividend of $0.44 per share at the moment, with a dividend yield of 2.35% compared to the Soap and Cleaning Materials industry's yield of 2.39% and the S&P 500's yield of 1.82%.

Taking a look at the company's dividend growth, its current annualized dividend of $1.76 is up 2.9% from last year. In the past five-year period, Colgate-Palmolive has increased its dividend 5 times on a year-over-year basis for an average annual increase of 3.26%. Future dividend growth will depend on earnings growth as well as payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. Colgate-Palmolive's current payout ratio is 59%. This means it paid out 59% of its trailing 12-month EPS as dividend.

CL is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2020 is $2.88 per share, which represents a year-over-year growth rate of 1.77%.

Bottom Line

From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. However, not all companies offer a quarterly payout.

High-growth firms or tech start-ups, for example, rarely provide their shareholders a dividend, while larger, more established companies that have more secure profits are often seen as the best dividend options. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. That said, they can take comfort from the fact that CL is not only an attractive dividend play, but is also a compelling investment opportunity with a Zacks Rank of #2 (Buy).


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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.

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