Colgate-Palmolive (CL, Financial) is a stable business that has been generating free-cash-flow yield of approximately 5% and distributing it to shareholders; it has grown organically at about 4% a year.7 One possible negative last year was the acquisition of a specialty skin cream company for which Colgate paid a relatively full multiple. However, Colgate was once again aligning with a science-based product that has strong advocacy from medical professionals (dermatologists in the case of the skin care acquisition), as it had done previously with dentists in its toothpaste business and veterinarians in its pet-food products. Another possible negative is that Colgate—with its large market share in India, Brazil and Mexico—is exposed to some weak currencies. In past periods, however, the company has often been able to recapture through pricing some of what it has lost on foreign exchange.
From First Eagle Investment (Trades, Portfolio)'s Global Income Builder Fund fourth-quarter 2019 shareholder letter.
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