Colgate Rewards Shareholders Again - Analyst Blog

Driven by its strong positive outlook, the global consumer products manufacturer, Colgate-Palmolive Company CL has raised its quarterly cash dividend, effective from the second quarter of fiscal 2014.

The company has hiked its quarterly dividend by approximately 6% to 36 cents per share from the prior payout of 34 cents. This comes to a yearly dividend of $1.44 per share, reflecting a dividend yield of nearly 2.3% based on Thursday's closing price of $63.23. The new dividend will be paid on May 15 to shareholders of record on Apr 22.

Colgate-Palmolive has a history of paying regular quarterly dividends since 1895, which clearly reflects its strong fundamentals. Since then, the company has paid dividends every quarter, even amid economic crises like the Great Depression of the 1930s, stagflation in the 1970s and the recession of 2008. Apart from paying regular dividends, the company has been focused on increasing its dividend rate every year for about 50 years now.

The strength of Colgate-Palmolive's business model is reflected in its strong cash generation capabilities and commitment to return value to shareholders. The company's strong balance sheet and cash flows provide it financial flexibility to make shareholder-friendly moves, R&D investments and expand business worldwide.

During 2013, Colgate-Palmolive shelled out $1,382 million on cash dividends and $1,521 million toward share repurchases. Cash and cash equivalents stood at $962 million at the end of the fiscal while cash from operational activities was $3,204 million. We remain encouraged by the company's strong cash position and its ability to service long-term debts.

Other companies that recently increased quarterly dividend include Meredith Corp. MDP and Family Dollar Stores Inc. FDO. These two companies raised their dividends by 6.1% to 43.25 cents and 19.2% to 31 cents, respectively. McGraw Hill Financial, Inc. MHFI also recently hiked its payout by 7.1% to 30 cents.

We believe that dividend hikes not only enhance shareholders' return but raise the market value of the stock as well. Through these dividend rises, companies persuade investors to either buy or hold the scrip instead of selling it. Looking ahead, Colgate-Palmolive remains confident of its growth potential, suggesting that further enhancement of shareholders' value through dividend payouts and share buybacks could take place.

Currently, Colgate-Palmolive has a Zacks Rank #3 (Hold).