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Colgate (CL) Cheers Investors With Dividend Amid Cost Woes

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Colgate-Palmolive Company (CL - Free Report) announced that its board of directors approved a quarterly cash dividend of 47 cents per share.The quarterly dividend will be paid out on Nov 15, 2022, to shareholders of record at the close of the business on Oct 21, 2022. This brings the new annualized dividend to $1.86 per share, resulting in a dividend yield of 2.4%.

The dividend increase is likely to come as a relief for investors since the company raised concerns about increasing raw material and logistics costs worldwide despite sales growth. Colgate has been largely impacted by the difficult global raw material environment. In second-quarter 2022, management stated that higher-than-anticipated increases in raw material costs dented the margins.

The gross profit margin contracted 300 basis points (bps) to 57% on a GAAP and adjusted basis. The operating margin contracted 370 bps to 19.7%. Adjusted SG&A expenses increased 5.7% year over year to $1,654 million due to a rise in advertising investments.

The company expects a gross margin decline on both GAAP and adjusted basis for 2022. It expects $1.3 billion in raw material and packaging inflation, along with higher logistics. For 2022, advertising investments are expected to increase year over year on both GAAP and adjusted basis.

However, innovation, brand strength and digital capabilities aided Colgate’s top line in second-quarter 2022, with double-digit organic sales growth in oral care and pet nutrition. It also witnessed robust sales growth across all regions.

The company is aggressively expanding its brands’ geographic footprint, along with enhancing distribution to faster growth channels. CL is gaining from strong market share gains in North America and China, its two largest markets, with increased share gains across all other regions.

The Hill's business continues to witness sales momentum, with sales growth of 14.5% in the second quarter and organic sales growth of 18%. Organic sales were aided by gains in the United States, Europe and Australia/New Zealand. Strength in oral care and pet nutrition remains the key growth drivers.

Driven by the above-mentioned factors, management anticipates 2022 net sales growth toward the higher end of its previously mentioned 1-4% growth. Organic sales are expected to increase 5-7% compared with 4-6% growth mentioned earlier.

We note that shares of this Zacks Rank #3 (Hold) company have gained 4.9% in the past three months compared with the industry’s growth of 5.1%.


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Coming to the latest news, the company has a five-year annualized dividend growth rate of 2.9%, reflecting dividend increases for five consecutive years. Colgate’s current dividend payout ratio is 60.8%. CL’s return on equity of 315.1% compares favorably with the industry’s 36%, underscoring management's efficiency in rewarding shareholders.

Colgate’s ability to reward shareholders with dividends and buybacks is backed by a strong cash flow and revenue generation capacity. The company’s annualized cash flow growth rate has been 5.34% over the past 3-5 years versus the industry average of 5.31%.

Dividend payouts are the biggest enticements for investors and Colgate is committed to boosting shareholders’ wealth. CL is a windows-and-orphan stock with a long history of regular, reliable dividends. In fiscal 2021, the company paid out $1.7 billion of dividends to shareholders. In the six months ending Jun 30, 2022, it paid out dividends worth $824 million.

All said, Colgate’s impressive fundamentals, strong footing in the industry and solid portfolio make it a promising stock. CL draws further investor attention through its regular dividend payouts and commitment to enhancing shareholder returns.

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Archer Daniels has been gaining from solid demand, improved productivity and product innovations. Persistent growth in the Nutrition segment bodes well.

Procter & Gamble (PG - Free Report) is a branded consumer products company, which markets its products in more than 180 countries. PG pays out an annual dividend of $3.65 per share, which gives it a 2.6% yield at the current stock price. The Zacks Rank #3 company has a five-year dividend growth rate of 5.3%.

Procter & Gamble remains well-placed on the back of robust sales, better pricing and improved productivity. The company is witnessing continued strong momentum, driven by underlying strength in brands and appropriate strategies. PG remains focused on productivity and cost-saving plans to boost margins.

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