Colgate Looks Pricey -- Are There Any Bargains Left?

Which two Colgate competitors offer higher dividends at lower prices?

Jul 18, 2014 at 4:28PM

Colgate-Palmolive (NYSE:CL) is set to go ex-dividend on July 16. In Wall Street's short attention span world, it's easy to lose the signal in the noise. It pays to focus on what matters, and what could matter more than the return to shareholders? A dividend is one of the most efficient ways for an investor to get paid, and Colgate is an all-time great dividend payer. In fact, Colgate has paid dividends without interruption since 1895 and increased its dividend payments for 51 consecutive years. 

Over the last decade, Colgate shareholders have seen their dividend nearly triple. In an age where many workers make do with sluggish wage growth, the kind of consistent dividend growth Colgate delivers is a welcome change of pace.  

CL Dividend Chart

CL Dividend data by YCharts

But this quality comes at a price, and today that price is in nose-bleed territory. Colgate's P/E sits at 30--that is a heady number for a large, low growth company, even one as high quality as Colgate. 

Whatever you think of Colgate's future and how long it will take for its quality to justify a high price, the bargain prices are behind us, at least for now. 

CL PE Ratio (TTM) Chart

CL P/E Ratio (TTM) data by YCharts

This is a company that really does not get to any level that is classically cheap. Even during the financial crisis, Colgate's P/E was only cheap relative to the premium it generally commands. 

Where can investors find quality income at a cheaper price than Colgate? Colgate's yield is currently 2%, just a hair above the S&P 500's 1.9% yield. Two companies worth considering are Kimberly-Clark (NYSE:KMB) and Unilever (NYSE:UL), both of which offer higher yields than Colgate.  


Dividend Yield







Both Kimberly-Clark and Unilever offer substantially higher yields than Colgate. On top of that, investors pay much more attractive prices for those yields relative to Colgate's nose-bleed P/E ratio.

CL PE Ratio (TTM) Chart

CL P/E Ratio (TTM) data by YCharts

This is a market environment where it's next to impossible to find stocks that are fundamentally cheap. However, there are relative bargains -- opportunities to improve your portfolio's income at cheaper prices relative to other stocks. Here we have such a case where both Kimberly-Clark and Unilever generate roughly 50% more dividend income for their investors. On a P/E basis, these companies' shares trade at around a third of the price of Colgate.

Its not as exciting as the bargainpalooza of 2009, but ~50% more income for a ~33% discount is an intriguing opportunity.

These aren't the only great dividend picks out there
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Gunnar Peterson owns shares of Unilever. The Motley Fool recommends Kimberly-Clark and Unilever. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

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David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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