Can Colgate's (CL) 5% Dividend Hike Drive Stock Momentum?

Colgate-Palmolive Company (NYSE:CL) is amongst those companies who regularly enhance its shareholders’ value via dividend payouts and share buybacks. Additionally, the company has been consistently increasing dividend rate every year since 2001. Keeping up with the trend, Colgate increased quarterly dividend by 5% to 42 cents from the previous payout of 40 cents per share. Effective second-quarter 2018, this will bring the company’s annualized dividend to $1.68 per share. The new dividend will be paid on May 15, 2018, to shareholders on record as of Apr 20.

On Jan 11, 2018, Colgate declared its first-quarter cash dividend of 40 cents per share, paid on Feb 15.

In fact, the company has to its credit a robust history of rewarding shareholders with regular quarterly dividend payouts since 1895. Since then, Colgate 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.

However, following the latest dividend hike not much movement was noticed in the company’s share price yesterday. In the past three months, the stock has lost 4.8%, narrower than the industry’s decline of 8.8%.

Notably, dividend hikes not only enhance shareholders’ return but raise the market value of the stock as well. In fact, through these dividend increases companies persuade investors to either buy or hold the scrip instead of selling it. Now, it remains to be seen whether this recent hike will help Colgate in regaining the lost momentum.

Prior to the current dividend hike, management had raised quarterly dividend by 3% to 40 cents per share versus 39 cents, in March 2017. Apart from highlighting commitment toward creating shareholder value, regular dividend payments and increments, reflect the company’s potential to enhance earnings and cash flow generation capabilities. Evidently, in 2017, the company returned about $2.9 billion to shareholders through dividends and share buybacks, which marked a year-over-year increase of nearly 3%. Also, this leading manufacturer of consumer products generated $3,054 million of cash from operations in and deployed $553 million toward capital expenditures the same time period.

Apart from Colgate, companies like Archer Daniels Midland Company (NYSE:ADM) , The Home Depot, Inc. (NYSE:HD) and DICK'S Sporting Goods, Inc. (NYSE:DKS) remain keen on rewarding shareholders through share repurchases and regular dividend payments. Recently, these companies have also declared dividend hikes.

Archer Daniels raised its dividend by 4.7% to 33.5 cents per share, which is payable on Mar 13, 2018. Home Depot declared a 15.7% increase in its quarterly dividend to $1.03 per share, payable on Mar 22. DICK'S Sporting Goods approved a quarterly dividend hike of nearly 32% to 22.50 cents per share, payable on Mar 30.

Colgate carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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