Analizând potențialul de creștere a dividendelor Colgate-Palmolive

Recap From November’s Picks

Overall, 10 out of the 30 Dividend Growth Stocks outperformed the S&P 500 from November 23, 2021 through December 27, 2021. On a price return basis, the Dividend Growth Stocks Model Portfolio (+0.5%) underperformed the S&P 500 (+1.9%) by 1.4%, and on a total return basis the Model Portfolio (+0.7%) underperformed the S&P 500 (+2.3%) by 1.6% The best performing stock was up 12%.

Metodologia pentru acest portofoliu de model imită stilul All Cap Blend, cu accent pe creșterea dividendelor. Acțiunile selectate obțin un rating atractiv sau foarte atractiv, generează un flux de numerar liber (FCF) și câștiguri economice pozitive, oferă un randament curent al dividendelor > 1% și au un istoric de peste 5 ani de creștere consecutivă a dividendelor. Acest portofoliu model este conceput pentru investitorii care sunt mai concentrați pe aprecierea capitalului pe termen lung decât pe venitul curent, dar care totuși apreciază puterea dividendelor, în special a dividendelor în creștere.

Featured Stock From December: Colgate-Palmolive Company
CL

Colgate-Palmolive Company (CL) is the featured stock from December’s Dividend Growth Stocks Model Portfolio. I made Colgate-Palmolive a Long Idea in June 2018. Since then, the stock is up 34% while the S&P 500 is up 78%. Despite its underperformance, the stock still offers attractive risk/reward. See my most recent report on Colgate-Palmolive here.

Colgate-Palmolive has grown revenue by 1% compounded annually and net operating profit after-tax (NOPAT) by 4% compounded annually over the past five years. The firm’s NOPAT margin improved from 16% in 2015 to 18% over the trailing-twelve-month (TTM) period, while the firm’s economic earnings rose from $2.0 billion to $2.5 billion over the same time.

Figure 1: Colgate-Palmolive’s NOPAT & Revenue Since 2015

FCF Exceeds Dividends By Wide Margin

Colgate-Palmolive has increased its dividend for 59 consecutive years. The firm increased its regular dividend from $1.55/share in 2016 to $1.75/share in 2020, 3% compounded annually. The current quarterly dividend, when annualized, equals $1.80/share and provides a 2.1% dividend yield.

More importantly, Colgate-Palmolive’s strong free cash flow (FCF) exceeds the firm’s growing dividend payments. Colgate-Palmolive’s cumulative $11.7 billion (16% of current market cap) in FCF is nearly 1.5x the $7.9 billion in dividends paid out from 2016 to 2020, per Figure 2. Over the TTM, Colgate-Palmolive generated $2.7 billion in FCF and paid $1.7 billion in dividends. Figure 2 also shows that Colgate-Palmolive’s FCF significantly exceeded its dividend payments in four out of the past five years.

Figura 2: Flux de numerar gratuit vs. Plăți regulate de dividende

Companiile cu FCF cu mult peste plățile de dividende oferă oportunități de creștere a dividendelor de calitate superioară, deoarece știu că firma generează numerar pentru a susține un dividend mai mare. Pe de altă parte, nu se poate avea încredere că dividendul unei companii în care FCF nu atinge plata dividendelor în timp va crește sau chiar își va menține dividendul din cauza fluxului de numerar liber inadecvat.

Colgate-Palmolive Has Upside Potential

At its current price of $85/share, CL has a price-to-economic book value (PEBV) ratio of 0.9. This ratio means the market expects Colgate-Palmolive’s NOPAT to permanently decline by 10%. This expectation seems overly pessimistic for a firm that has grown NOPAT by 5% compounded annually over the past two decades.

Even if Colgate-Palmolive maintains TTM NOPAT margins of 18% (below five-year average of 19%) and grows NOPAT by just 2% compounded annually for the next decade, the stock is worth $105/share today – a 24% upside. See the math behind the reverse DCF scenario.

Should the firm grow NOPAT more in line with historical growth rates, the stock has even more upside. Add in Colgate-Palmolive’s 2.1% dividend yield and history of dividend growth, and it’s clear why this stock is in December’s Dividend Growth Stocks Model Portfolio.

Detalii critice găsite în înregistrările financiare de către firma My's Robo-Analyst Technology

Below are specifics on the adjustments I make based on Robo-Analyst findings in Colgate-Palmolive’s 10-Qs and 10-K:

Income Statement: I made $601 million in adjustments with a net effect of removing $370 million in non-operating expenses (2% of revenue). See all adjustments made to Colgate-Palmolive’s income statement here.

Balance Sheet: I made $7.2 billion of adjustments to calculate invested capital with a net increase of $5.4 billion. The most notable adjustment was $4.3 billion (38% of reported net assets) in other comprehensive income. See all adjustments to Colgate-Palmolive’s balance sheet here.

Valuation: I made $12.2 billion in adjustments with a net effect of decreasing shareholder value by $11.6 billion. Other than total debt, the most notable adjustment to shareholder value was $1.9 billion in underfunded pensions. This adjustment represents 3% of Colgate-Palmolive’s market value. See all adjustments to Colgate-Palmolive’s valuation here. 

Dezvăluire: David Trainer, Kyle Guske II și Matt Shuler nu primesc nicio compensație pentru a scrie despre orice stoc, stil sau temă specifică.