Colgate-Palmolive ($CL), a company dominating over 45% of the world’s toothpaste market presents an excellent opportunity to diversify any portfolio. Looking past the prestigious brand name, Colgate demonstrates strong fundamentals, a low beta, global diversification and a first class dividend history. All these attributes make Colgate an attractive investment opportunity.
In the past five years, Colgate has significantly outperformed the S&P 500, Johnson & Johnson ($JNJ) and Procter & Gamble Company ($PG) (See graph below).
Strategic global positioning and quality products contribute to Colgate’s impressive performance. North America accounts for 18% of Colgate-Palmolive’s sales as the company derives over 50% of their revenue from emerging markets and operates over 200 countries. The graph below displays sales revenue by region.
Shareholders have enjoyed an uninterrupted dividend since 1895. In addition, the dividend amount has increased annually for over 50 years. Colgate’s dividend yielded a 2.3% return to investors last year.
Colgate is recession-proof due to the nature of the consumer staple industry. This industry provides goods such as; toothpaste, soap, shampoo and household cleaning supplies. During times of economic uncertainty and hardship, there is little change in the demand for consumer staples. As a result, Colgate’s beta of 0.45 is lower than the market. Beta measures a stocks systematic risk (volatility) relative to the market and the market’s beta always equals 1.0. A stock with a beta less than the market is less volatile. Conversely, a stock with a beta greater than 1.0 is more volatile.
The stock currently trades at around 20 times earnings, which means investors are willing to pay $20 dollars/share for $1 of earnings. This figure is slightly higher than the S&P average (18.23) but more attractive than speculative stocks like $AMZN and $NFLX.
Colgate-Palmolive’s sales and profits continually increase year over year with little signs of a slowdown.
The Colgate’s management team displays their superiority through impressive return on equity (ROE %), return on investment (ROI %), and return on assets (ROA %) ratios. Colgate’s profitability ratios are unparalleled compared to their industry competition. The company’s current earnings are high enough to cover their interest payments over 48 times (Interest Coverage Before Tax) and indicate there is no fear of bankruptcy or defaulting on debt obligations.
A healthy balance sheet, strong earnings, elite management, and regular dividend payments make Colgate-Palmolive a wise investment decision. This company leads the pack and outperforms the rivals in their recession-proof industry. Based on fundamentals, this stock is a great option for any value investor.
Full disclosure: I do not hold a position in any stock mentioned in this article and I do not intend to change my position in the next 72 hours.© 2013 Dividend Buddy This website is for general informational purposes only and does not constitue investment advice. Nothing herein should be relied upon as an investment recommendation. While every effort has been made to ensure the accuracy of information provided this website cannot guarantee the completeness or accuracy of any information published.