Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. But for income investors, generating consistent cash flow from each of your liquid investments is your primary focus.

While cash flow can come from bond interest or interest from other types of investments, income investors hone in on dividends. A dividend is the distribution of a company's earnings paid out to shareholders; it's often viewed by its dividend yield, a metric that measures a dividend as a percent of the current stock price. Many academic studies show that dividends make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.

Colgate-Palmolive in Focus

Based in New York, Colgate-Palmolive (CL) is in the Consumer Staples sector, and so far this year, shares have seen a price change of 25.42%. Currently paying a dividend of $0.5 per share, the company has a dividend yield of 2%. In comparison, the Soap and Cleaning Materials industry's yield is 2.32%, while the S&P 500's yield is 1.51%.

In terms of dividend growth, the company's current annualized dividend of $2 is up 4.7% from last year. In the past five-year period, Colgate-Palmolive has increased its dividend 5 times on a year-over-year basis for an average annual increase of 3.02%. Any future dividend growth will depend on both earnings growth and the company's payout ratio; a payout ratio is the proportion of a firm's annual earnings per share that it pays out as a dividend. Right now, Colgate-Palmolive's payout ratio is 57%, which means it paid out 57% of its trailing 12-month EPS as dividend.

Earnings growth looks solid for CL for this fiscal year. The Zacks Consensus Estimate for 2024 is $3.57 per share, which represents a year-over-year growth rate of 10.53%.

Bottom Line

Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. However, not all companies offer a quarterly payout.

High-growth firms or tech start-ups, for example, rarely provide their shareholders a dividend, while larger, more established companies that have more secure profits are often seen as the best dividend options. Income investors must be conscious of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, CL presents a compelling investment opportunity; it's not only an attractive dividend play, but the stock also boasts a strong Zacks Rank of #2 (Buy).

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Colgate-Palmolive Company (CL) : Free Stock Analysis Report

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