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2 Dividend Stocks for Your October Watch List

By Demitri Kalogeropoulos – Oct 5, 2021 at 11:00AM

Key Points

  • Owners of Colgate-Palmolive and Lowe's will receive their next quarterly payouts soon.
  • Both companies enjoy growth track records that span decades.
  • And their dividend payments are well covered by earnings.

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These income payers are worth watching over the next few weeks.

October marks the beginning of the final quarter of the year, a critical period for most businesses. And for investors, it's the final period for determining annual stock market returns.

A key part of those returns can be dividends -- and this month brings income payments from a number of major dividend stocks. I believe two of the most attractive dividend payers right now are Lowe's (LOW -2.97%) and Colgate-Palmolive (CL -0.19%). Let's look at why these dividend giants deserve a spot on your watch list.

A couple shopping for appliances.

Image source: Getty Images.

1. Lowe's

The stock of Lowe's has been outperforming the market for most of 2021 thanks to an unusually strong selling environment in the home-improvement industry. The company revealed in late August that sales were up 32% over the past two years as consumers continued to prioritize spending on home upgrades and remodeling.

The company's profitability is even closing in on rival Home Depot and likely to hit 12% of sales this year.

LOW Operating Margin (TTM) Chart

LOW Operating Margin (TTM) data by YCharts.

Lowe's next dividend payment will hit investors' accounts in early November if they own the shares by October 20. The payout is $0.80 per share, providing a 1.6% annual yield based on its latest stock price -- better than the current 1.3% yield for the S&P 500. That's a solid bonus for a company that should benefit from continued profit-margin expansion over the next few years.

Lowe's has an attractive growth story that involves catching up with its main rival -- and that impetus should deliver great returns for shareholders if it plays out as management hopes it will.

2. Colgate-Palmolive

Consumer products powerhouse Colgate-Palmolive is one of those rare companies with over a century of uninterrupted dividend payments behind it. And its next payout -- to shareholders of record as of October 21 -- will mark the company's 59th consecutive year of raising its dividend. That's mighty impressive.

And yet, the toothpaste and cleaning-supply giant has been trailing the market by a wide margin this year, mainly because investors are looking for splashier growth in other sectors. There are also concerns about shrinking margins thanks to rising costs and increased spending in areas like advertising.

But Colgate-Palmolive is enjoying solid sales gains in 2021 on top of last year's surge. Organic sales were up 5% in the most recent quarter and its dominant market-share position in toothpaste held steady at 39% of global sales. .

Colgate's dividend yield -- at about 2.4% -- is roughly even with Procter & Gamble's and a full percentage point higher than you could get from owning a diversified index fund that tracks the S&P 500. Owning this consumer products stock should deliver shareholders a good mix of income and capital appreciation over the next few years -- and Colgate is slightly cheaper than its rival today, as measured by the price-to-sales ratio. 

CL PS Ratio Chart

CL PS Ratio data by YCharts

Investors interested in buying Colgate or Lowe's don't need to feel rushed to establish their positions before the upcoming dividend payment. But if you were already planning to purchase these Dividend Aristocrats, the immediate income should nicely amplify your returns.

Demitri Kalogeropoulos owns shares of Home Depot. The Motley Fool owns shares of and recommends Home Depot. The Motley Fool recommends Lowes. The Motley Fool has a disclosure policy.

Stocks Mentioned

Lowe's Companies Stock Quote
Lowe's Companies
LOW
$200.06 (-2.97%) $-6.12
Procter & Gamble Stock Quote
Procter & Gamble
PG
$148.91 (-0.12%) $0.18
Colgate-Palmolive Stock Quote
Colgate-Palmolive
CL
$76.97 (-0.19%) $0.14
Home Depot Stock Quote
Home Depot
HD
$316.00 (-1.27%) $-4.08

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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