Why Colgate-Palmolive Is a Top Dividend Stock

Investors have always been interested in stocks that pay dividends, but lately, low interest rates on bonds and other fixed-income investments have made solid dividend payers even more valuable. Among the most promising dividend stocks in the market is Colgate-Palmolive (CL 1.07%), and one big reason is that it is one of the few exclusive companies to make the list of Dividend Aristocrats. In order to become a member of this elite group, a company must have raised its dividend payouts to shareholders every single year for at least a quarter-century. Only a few dozen stocks manage to make the cut, and those that do tend to stay there for a long time.

Colgate-Palmolive is well-known for its impressive stable of consumer products. Doing business around the world, the company has delivered not only solid dividends for decades, but also the growth prospects that investors always like to see in a stock. Let's take a closer look at Colgate-Palmolive to see whether it can sustain its long streak of rewarding dividend payouts to investors.

Dividend Stats on Colgate-Palmolive

Source: Yahoo! Finance. Last increase refers to ex-dividend date. * Declared but not yet paid.

How has Colgate-Palmolive been treating shareholders lately?
As one of the best companies in America, Colgate has come from modest roots as a soap and toothpaste maker to become a global consumer-goods powerhouse. Even given the defensive nature of the sector, Colgate's stock has performed extremely well, soaring to new all-time highs, and climbing more than 50% since early 2011.

Colgate's overall growth strategy is largely behind the successful performance of its stock, as the company has tied its success to that of international markets across the globe. With a particular emphasis on Latin America, Colgate has prospered with strong financial results. By contrast, Procter & Gamble, the giant in the sector, has had trouble keeping its growth up in light of difficulties with product innovation, and a slowdown in its international growth. That has opened the door for Colgate to take a bigger role in the industry.

Yet, companies with strong track records of raising dividends for decades have generally had to overcome challenges along the way. Like many of its consumer-products peers, Colgate has had to face rising costs for some of the materials it needs to produce its goods. In order to keep its margins up, Colgate announced layoffs last fall amounting to about 6% of its workforce around the world. Despite those pressures, Colgate-Palmolive has managed to keep its payouts strong:

Colgate-Palmolive Dividend data by YCharts.

One big problem that hit Colgate recently was the devaluation of the Venezuelan bolivar currency. Colgate failed to be as proactive about the potential for a devaluation as Clorox, which, even before the devaluation took place, had already estimated the impact of a drop in the value of the bolivar on its earnings per share by the time it released its earnings in early February. But Colgate did note that its growth projections were contingent on no devaluation taking place, and shortly after the devaluation occurred, Colgate quickly came out with a total impact of around $0.50 per share on 2013 earnings.

When will dividends rise again?
Colgate-Palmolive just raised its dividend by almost 10%, extending its streak of annual increases to an even half-century. Colgate has been methodical about its annual increase, so don't expect another bump up until next spring. But, given its ability to boost its payout even after an unexpected hit from the Venezuela devaluation, Colgate-Palmolive clearly has the resiliency needed to remain a Dividend Aristocrat for a long time.

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