In my March 31, 2022 Why I Exited My Colgate Position post at Dividend Power, I share why I am no longer a Colgate (CL) shareholder.
CL is a company that has exhibited virtually no top-line growth in a decade. Its Operating income and Net income growth have not fared any better over the same period.
When we account for the time value of money, CL's total shareholder return is even worse than at first blush. CL is, essentially, a stagnant company.
Shareholders who fixate on a company's dividend metrics might find CL to be appealing; it is one of the longest dividend-paying companies in the US. Focusing primarily, or solely, on dividend metrics, however, leads to poor investment decisions. Investors should look at a company's potential total investment return.
With CL, we have a company whose dividend history includes several years in which the quarterly dividend increase was $0.01 or $0.02 per share.
These dividend increases do not remotely compensate investors for the negligible long-term capital appreciation. Furthermore, it is highly unlikely CL will amend its dividend policy to reward shareholders with significantly larger annual dividend increases.
I also take issue with CL's repurchase of issued and outstanding shares over the past 1.5 years. Shares repurchases have been made in the high $70s and the $80s. CL, however, is currently trading at ~$75.80. Essentially, CL's share repurchases at these levels were destroying shareholder value.
Past performance certainly does not predict future performance. CL's abysmal total shareholder return over the 6.5 years in which I was an investor, however, instills very little confidence that things will improve.
CL was never within my top 30 holdings. In hindsight, I should have never invested in CL. At the very least, I should have exited my position ages ago.
Through the good fortune of Dividend Power's request for me to provide a CL guest post, I finally took the time to look at one of my smaller holdings. Based on my analysis, I exited my position.
I have yet to redeploy the sale proceeds and await the valuation of higher-quality companies to improve.
I wish you much success on your journey to financial freedom!
Note: Please send any feedback, corrections, or questions to [email protected].
Disclosure: I do not hold a position in CL and have no intention of initiating a position in the foreseeable future.
Disclaimer: I do not know your circumstances and do not provide individualized advice or recommendations. I encourage you to make investment decisions by conducting your research and due diligence. Consult your financial advisor about your specific situation.
I wrote this article myself and it expresses my own opinions. I do not receive compensation for it and have no business relationship with any company mentioned in this article.
