Colgate-Palmolive Company (NYSE:CL) is approaching its ex-dividend date, with shareholders needing to purchase shares before Friday to qualify for the next dividend payment of $0.48 per share, amounting to $1.92 for the year. This comes amidst concerns surrounding the company's shrinking earnings and dividend sustainability.
The company's trailing yield currently stands around 2.7% on its stock price of $72.15. However, Colgate-Palmolive paid out more than its earnings last year, with a payout ratio of 105%. Despite this, the firm managed to cover the dividend with 73% of its free cash flow. According to InvestingPro data, the company's dividend yield as of Y2023.D290 stands at 2.66%, with a dividend growth of 2.13% LTM2023.Q2.
Over the past five years, the company has witnessed a decline in earnings of 4.6% annually. In contrast, it has increased its dividend by approximately 4.5% per year over the past decade despite these shrinking earnings. This discrepancy raises additional concerns about its financial health. InvestingPro Tips reveal a declining trend in earnings per share, but it's worth noting that the company has raised its dividend for 34 consecutive years and maintained dividend payments for 53 consecutive years.
Analysts highlight that estimates of future dividends and an understanding of investment risks are critical for potential investors, particularly given the three identified warning signs with Colgate-Palmolive. Despite these issues, the company remains listed among robust dividend payers. Its suitability for long-term buy and hold investors is under scrutiny due to these financial concerns.
On a positive note, Colgate-Palmolive has a high earnings quality, with free cash flow exceeding net income, and operates with a high return on assets, as highlighted by InvestingPro Tips. The company's gross profit margin stands at 56.87% LTM2023.Q2, according to InvestingPro data. Furthermore, six analysts have revised their earnings upwards for the upcoming period, indicating potential for improved financial performance.
For more in-depth analysis and tips, consider the InvestingPro product that includes 15 additional InvestingPro Tips for Colgate-Palmolive and real-time metrics. This tool can provide valuable insights for investors looking to make informed decisions about their investments.
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