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Colgate-Palmolive Company (CL) Stock Analysis Pollie Style

In my half year review of 2017 (You can read it here – Letter to my readers – 2017: Half year review)I noticed that I only published my research on one company. That is way too little. So it is time for an analysis Pollie-Style again.

I looked into way more companies, but didn’t post this on my website. So I imposed myself to publish more analysis Pollie-style.

Today is my first analysis for this new goal. For my analysis I use the famous CCC-list of David Fish my Pollie-code. Okay but which company to look into? I have 2 important lists of stocks I really like. The first list is my watch list. This list contains about 20 stocks. The second list is my list with Dividend Zombies (For more information on the Dividend Zombies, just read my Impressive stocks post)

One of the companies that is on both my lists is Colgate-Palmolive. So this analysis is on Colgate-Palmolive Company (CL).

 

www.polliesdividend.com

 

Company

From google finance: Colgate-Palmolive Company (Colgate) is a consumer products company. The Company operates in two product segments: Oral, Personal and Home Care, and Pet Nutrition. The Oral, Personal and Home Care product segment is operated through five geographic segments. The Company’s oral care products include Colgate Total, Colgate Sensitive Pro-Relief, Colgate Max Fresh and Colgate Optic White. The Company is also engaged in various product categories of the personal care market with operations in liquid hand soap, which it sells under the Palmolive, Protex and Softsoap brands. The Company manufactures and markets a range of products for the home care market, including Palmolive and Ajax dishwashing liquids, Fabuloso and Ajax household cleaners and Murphy’s Oil Soap. The Company, through its Hill’s Pet Nutrition segment (Hill’s), manufactures pet nutrition products for dogs and cats.

Can I explain this to a 10-year old? What Does This Company Do?
This company makes soap and toothpaste which you use every day. And it makes cleaning products your parents use for cleaning your house. And of course don’t forget the food for your pets.

 

Pollie-code Analysis

Dividend Aristocrat: CL hasn’t missed a dividend payment in 122 years! Yes this is impressive and that’s why I call it a Dividend Zombie. CL has raised its dividend for 54 consecutive years. It is therefore a Dividend Aristocrat on the CCC-list from David Fish! (No.15). They are a three star stock on Morningstar.com. That’s a Passed!

Dividend Yield > 2.5%: The dividend Yield of CL is 2.2%. This is below the industry average of 2.6%. But it is at its 5 years average (2.2%). The Yield is below the requirements of the Pollie-Code, and therefore it is a fail.

Dividend payout <70%: The dividend payout is roughly 58%. This is below the maximum ratio. This’s what a DGI wants. So CL also passes for this point.

DGR 1 year > 0%: The dividend growth rate for 1, 3, 5 and 10 years are 3.3, 5.2, 6.4 and 9.5. With a 3-years average around 5% this looks very good! And it is above the requirements of the Pollie-code, so it is a pass.

P/E-ratio < 15: This is an easy metric that is well documented. It can be used as a quick metric to identify stocks that may potentially be undervalued. I use this to identify stocks that may be discounted compared to the overall stock market. CL has a current P/E ratio of 26.76. The industry average is 19.7. The P/E ratio is way above the industry average. But it is lower that its 5-years average (28.6). Obvious CL isn’t a bargain now. The P/E-ratio is above the requirement of the Pollie-Code. So this is a Fail.

EPS > 0: The EPS is 2.77. So CL passed the sixth Pollie-Code

ROE > 10%: Return on equity measures a corporation’s profitability by revealing how much profit a company generates with the money shareholders have invested. The current ROE is negative and really worse in comparison with its competitors (Unilever (UL) has the best ROE at this moment). This is another Fail.

Market Cap. > 100M: No problem at this point. The Market cap. Is more than $ 65.609 Mil. You guested it already: Another pass.

Chowder Rule > 12: Named after “Seeking Alpha” member Chowder. This is a method of identifying candidates for purchase based on a combination of yield and (5-year) dividend growth rate. When the sum of these elements is above 12%, the company presents an attractive entry point (8% for utilities). When the figure is above 8%, an existing holding is still considered worthy of being retained. The current Chowder rule is 8.6. This was expected with the current yield and DGR. So it is another Fail.

Stock price 52wk high-25%: The 52 wk. high and low are: 77.27 and 63.43. This means that CL will be in my buying zone when the stock price is below 73.81 ((77.27-63.43)*0,75 + 63.43). At this moment CL is trading for $72.49. Therefore it is a pass on the Pollie-Code.

Beta: I think it’s important to have low Beta stocks in my portfolio. This helps to have a stable income all the time, even when the market has a rapid decline. The Beta for CL is 0.80.

 

Conclusion

When I look at my analysis, Colgate- Palmolive passed 6 out of 10 from the Pollie-code. Mmmmm that is not that much. If we look at the metrics that failed, this paints a picture that Colgate-Palmolive is a bit overvalued at this moment. Colgate-Palmolive is a high-quality company, but investors have to pay a high price for the luxury of owning the stock.

So if you have a long enough time horizon, Colgate-Palmolive is a great company. It is a safe and incredibly consistent dividend grower and one of the best and most trustworthy companies you can own in a diversified dividend portfolio.

All this information together I will leave CL on my watch list for my Vrijheid Fonds and probably will not take action in the near future.

What are you – the readers, thoughts on Colgate-Palmolive Company? Is it a buy, do you own it?

Please comment on my analysis and thanks for stopping by!

Pollie.

 

 

Disclaimer: I’m not a registered investment adviser, investment professional, brokerage firm or investment company. Readers are advised that information on the website is issued solely for information purposes and not to be construed as an offer or recommendation to buy, hold, or sell any securities. All information, opinions, and analyses included are based on sources believed to be reliable, but no representation or warranty is made concerning accuracy, correctness, timeliness, or appropriateness. Please consult with an investment professional before investing any of your money.

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6 thoughts on “Colgate-Palmolive Company (CL) Stock Analysis Pollie Style

  1. DividendSolutions

    Hey Pollie,

    tx for sharing your analysis of CP. Good work!! – The Chowder rule is interesting, hadn’t heard about this until now…I like Colgate Palmolive, but as you, i think they’re a bit overvalued right now. Same with PG, although i would like to see both companies in my Lonestar Freedom Fund.

    Keep it up,

    DividendSolutions

  2. BescheidenBeurs

    I think it is an excellent strategy to have objective indicators guiding you in your stock-selection. It takes the emotion out of your decision making and that is what you want. I am woking on a set of indicators for myself at the moment.

  3. KeithX

    Pollie,
    I didn’t know that ROE was negative, but I looked it up and the shareholders’ equity has been negative since 2015. The debt to capitalization is 99% according to FASTGraphs, while PG’s is only 19%. I didn’t realize how high CL’s debt has gotten. Could be a red flag. Thanks for sharing your findings!
    Keith

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