The shift makes Colgate-Palmolive just a little more attractive. The combination of past performance, and a surprising extra feature, leaves me fairly bullish on Colgate-Palmolive overall.
Colgate-Palmolive’s year has been fairly moderate so far. For most of the year, Colgate-Palmolive’s share price has remained in a tight range between $76 and $84.
There have been a few breakouts above $84, but these seldom lasted long. One pronounced dip back in late February/early March kept the price below $76 for a while, but even here, it never got much lower than $74 for a closing price. (See Colgate-Palmolive stock charts on TipRanks)
Deutsche Bank analysts noted that many of Colgate-Palmolive’s troubles are already priced into the stock. This is particularly true for inflation, an increasing concern worldwide.
Most investors, analysts noted, are focused tightly on issues of costs for companies like Colgate-Palmolive. Perhaps too tightly, Deutsche Bank’s Steve Powers noted. Powers additionally noted that the improved focus on growth at Colgate-Palmolive isn’t as appreciated as it should be.
Thus, Deutsche Bank not only hiked its recommendation (to a Buy from a Hold), but also its price target, going from $84 per share to $86 per share.
Wall Street’s Take
Wall Street consensus analysis calls Colgate-Palmolive a Hold. This assessment has changed several times in the last year. As recently as September 2, Colgate-Palmolive was considered a Moderate Buy, which changed from being a Hold back on April 1.
Out of the nine analysts giving 12-month price targets on Colgate-Palmolive in the last three months, two consider the company a Buy, while seven call it a Hold.
The average Colgate-Palmolive price target is in a very narrow range. The current average price target is $88, which represents upside potential of 14.9%.
An Unexpected Income Champ
The overwhelming majority of analysts right now call Colgate-Palmolive a Hold, and with good reason.
Looking for Colgate-Palmolive to be a winner among growth stocks is about like looking for a rock to win the Kentucky Derby. The past year shows minimal movement in the company’s share price overall. That’s not great for anyone looking for growth value. For those looking for a safe, secure income stock, however, Colgate-Palmolive may be a winner.
A look at Colgate-Palmolive’s dividend history shows an exciting upward trend. The company has raised its dividend every year for the last five years, and then some. Never by very much, granted.
Considering that we just went through a pandemic, a company that’s hiking its dividend, even by cents per share, is a welcome sight.
There’s no doubt Colgate-Palmolive benefited from the pandemic, and the stock-up frenzy that followed. There’s also no doubt that that benefit is gone now, as most of the world re-opens. Yet the need for soaps, toothpaste, and the like will never truly go away.
This consistent demand should make Colgate-Palmolive stock an attractive prospect for some time to come. Its regular — and regularly raised — dividend only sweetens an already attractive pot.
Disclosure: At the time of publication, Steve Anderson did not have a position in any of the securities mentioned in this article.
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