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MARKETS LIVE BLOG:

STOCKS TRADE MIXED AFTER ISRAEL STRIKE-FUELLED TUMBLE

Shares of Netflix, the first of the megacap techs to report, slide in early trading

Can Colgate's (CL) Dividend Hike Help Boost Stock Further?

Zacks Equity Research
Updated

Colgate-Palmolive Company CL has to its credit a solid history of rewarding shareholders with regular quarterly dividend payouts since 1895. Since then, the company has paid dividends every quarter, even amid economic crises like the Great Depression of the 1930s, stagflation in the 1970s and the recession of 2008.

Apart from consistent dividend payouts, the company has focused on increasing dividend rate every year since 2005. Keeping up with this trend, Colgate-Palmolive hiked quarterly dividend by 3% to 40 cents from the previous payout of 39 cents per share. Effective second-quarter 2017, this brings the company’s annualized dividend to $1.60 per share, currently yielding 2.2%. The new dividend will be paid on May 15, to shareholders on record as of Apr 21, 2017.

Dividend hike is frequent among companies with a stable cash position and healthy cash flows. We believe that dividend hikes not only enhance shareholders’ return but raise the market value of the stock as well. Through these dividend increases companies persuade investors to either buy or hold the scrip instead of selling it.

However, following the dividend hike announcement not much movement was noticed in the stock yesterday. Shares of this manufacturer and seller of consumer products grew a meager 0.3% on Mar 9, 2017. In fact, if we look at the stock’s performance in the past six months it has inched up roughly 1%.

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Nevertheless, shares have shown a significant improvement in the past one month, jumping 8.4% and clearly outperforming the Zacks categorized Soap and Cleaning Preparations industry’s increase of 6.4%. We believe that investors have shunned the negative sentiment that arose after Colgate-Palmolive reported a not so inspiring fourth-quarter 2016 results. (Read: Colgate Q4 Earnings In Line, Revenues Lag; Stock Down)

Investors seemed to be much more impressed with the company’s savings programs. Both its Global Growth and Efficiency Program or 2012 Restructuring Program along with its Funding the Growth undertakings are delivering encouraging results. These initiatives contributed to the expansion of adjusted gross margin by about 180 basis points (bps) and adjusted operating margin by about 190 bps in fourth-quarter 2016.

Colgate-Palmolive currently carries a Zacks Rank #3 (Hold).

Stocks to Consider

Better-ranked stocks in the space are Ingredion Incorporated INGR, The Hershey Company HSY and Pinnacle Foods Inc. PF, all carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Ingredion Incorporated delivered an average positive earnings surprise of 10.4% in the trailing four quarters and has a long-term earnings growth rate of 11%.

The Hershey Company delivered an average positive earnings surprise of 7.9% in the trailing four quarters and has a long-term earnings growth rate of 7.8%.

Pinnacle Foods delivered an average positive earnings surprise of 1.73% in the trailing four quarters and has a long-term earnings growth rate of 8.3%.

More Stock News: 8 Companies Verge on Apple-Like Run

Did you miss Apple's 9X stock explosion after they launched their iPhone in 2007? Now 2017 looks to be a pivotal year to get in on another emerging technology expected to rock the market. Demand could soar from almost nothing to $42 billion by 2025. Reports suggest it could save 10 million lives per decade which could in turn save $200 billion in U.S. healthcare costs.

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Hershey Company (The) (HSY): Free Stock Analysis Report
 
Colgate-Palmolive Company (CL): Free Stock Analysis Report
 
Ingredion Incorporated (INGR): Free Stock Analysis Report
 
Pinnacle Foods, Inc. (PF): Free Stock Analysis Report
 
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Zacks Investment Research