Colgate-Palmolive Company is a global consumer product company:
• Oral Care – 46% of revenues
• Personal Care – 21% of revenues
• Pet Nutrition – 13% of revenues
• Home Care – 20% of revenues
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(source: Company’s website)

Company is selling products all over the world – in long term population growth is supporting, people are getting richer, urbanization is strengthening. Geographical split of revenues for last quarter and nine months is presented below:

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(source: Company’s 3Q financial results)

Company’s position on the market is very strong – company is market leader in most markets/lines of products

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(source: Company’s website)

As it comes to financials (estimates):
Market cap ~ $59B
Net debt ~$5B
Payout ratio ~55%
ROE non applicable (very low equity)
Beta = 0.93
Dividend yield 2.3% + buyback program $5B/4years = $1.25B/year = 2% (assuming the whole program will be completed)

Estimated valuation ratios:
P/E = 22 (forward)
EV/EBITDA = 14.3 (ttm)

Colgate-Palmolive is one of The Dividend Kings – company with more than 50 years of rising dividends. Currently company is paying 2% dividend yield – it is almost flat for last 10 years. – only in 2009 company was paying 3% dividend yield. On the other hand dividends of Colgate-Palmolive are growing really fast – historically around 8% yearly. This gives total yearly return above 10% per annum. Nice, but in line with peers.

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(source: Company’s website, CLSA Investors’ Forum 2015 Presentation)

 

Drawdown risk analysis:

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Colgate-Palmolive is a diversified business so low drawdown risk should not be taken as surprise. Historically share drawdowns did not exceeded 40% with only periodic 30% drawdowns. Currently shares are around all-time high, so I am not interested in buying. I think that every price around $54 should be taken as attractive (20% drawdown).

 

Summing up – Colgate-Palmolive is The Dividend King and it is hard to discuss with a wonderful long term historical performance of stocks. Nevertheless currently I am not planning to buy shares – valuation is demanding and dividend yield unsatisfactory for me. In case of 20%+ drawdown I will buy some shares.

 

Disclaimer CL – no position