Among the stocks beating the market in terms of higher dividend yield is Colgate-Palmolive Co. (CL, Financial). The American manufacturer of well-known household, health care and personal care products is granting a dividend yield of 2.65%. The dividend yield of the S&P 500 Index is 2.01%.
In addition, as of Jan. 18, the company is doing better than most of its competitors as the industry has a median dividend yield of 2.06%.
Colgate-Palmolive has built this return on a quarterly dividend of 42 cents per share. The company's most recent dividend was declared on Jan. 10 and will be paid on Feb. 15 to shareholders of record as of Jan. 23.
Due to flattening sales, investors have steered away from Colgate-Palmolive over the last five years. The stock has underperformed the overall market by nearly 60%.Ă‚ The stock closed at $62.63 on Friday
Highly challenging international macroeconomic conditions have resulted in low growth rates in each of the company's product segments, affecting the top line.
Heightened competition in certain markets and changes in consumer tastes have also played a role in the company's poor growth.Ă‚
Since Colgate-Palmolive generates about 70% of its revenue outside the U.S., volatile foreign currency fluctuations in emerging markets and increasing material costs due to inflationary pressure have resulted in higher operating costs. As a result, net income decreased 2.1% over the last five years.
Nevertheless, Colgate-Palmolive has a higher net margin (13.55%) than its competitors. The industry median is 3.90%. The net margin rose 2.4% on average over the last five years.
Further, the following ratios, which measure the management's effectiveness, suggest Colgate-Palmolive is taking the right steps to temper the effects of the challenging industry environment. These ratios are the five-year return on assets of 17.56%, the five-year return on investment of 25.54% and the five-year return on equity of 265.45% versus industry medians of 13.84%, 24.91% and 31%.
GuruFocus has assigned a financial strength rating of 5 out of 10 and a profitability and growth rating of 6 out of 10.
Colgate-Palmolive’s dividend income-focused shareholders are concerned about the company’s ability to continue generating strong cash flow performance. However, the company has paid dividends for over four decades. In addition, the company's return on invested capital of 44.3% versus a weighted average cost of capital of 6.31% suggest the company is allocating its capital effectively.Â
The stock has a recommendation rating of 2.7 out of 5. This means analysts recommend holding shares of Colgate-Palmolive, and I agree.
Disclosure: I have no positions in any securities mentioned in this article.
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