Colgate-Palmolive (NYSE:CL) Is Increasing Its Dividend To $0.48

Colgate-Palmolive Company's (NYSE:CL) dividend will be increasing from last year's payment of the same period to $0.48 on 15th of August. The payment will take the dividend yield to 2.5%, which is in line with the average for the industry.

View our latest analysis for Colgate-Palmolive

Colgate-Palmolive's Payment Has Solid Earnings Coverage

Unless the payments are sustainable, the dividend yield doesn't mean too much. Based on the last payment, Colgate-Palmolive's profits didn't cover the dividend, but the company was generating enough cash instead. Healthy cash flows are always a positive sign, especially when they quite easily cover the dividend.

Over the next year, EPS is forecast to expand by 100.2%. If the dividend continues along recent trends, we estimate the payout ratio will be 51%, which would make us comfortable with the sustainability of the dividend, despite the levels currently being quite high.

Colgate-Palmolive Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2013, the dividend has gone from $1.24 total annually to $1.92. This means that it has been growing its distributions at 4.5% per annum over that time. Dividends have grown relatively slowly, which is not great, but some investors may value the relative consistency of the dividend.

Colgate-Palmolive May Find It Hard To Grow The Dividend

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Let's not jump to conclusions as things might not be as good as they appear on the surface. Colgate-Palmolive has seen earnings per share falling at 4.1% per year over the last five years. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.

Our Thoughts On Colgate-Palmolive's Dividend

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. The company has been bring in plenty of cash to cover the dividend, but we don't necessarily think that makes it a great dividend stock. This company is not in the top tier of income providing stocks.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 3 warning signs for Colgate-Palmolive that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.