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Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. But when you're an income investor, your primary focus is generating consistent cash flow from each of your liquid investments.

Cash flow can come from bond interest, interest from other types of investments, and of course, dividends. A dividend is that coveted distribution of a company's earnings paid out to shareholders, and investors often view it by its dividend yield, a metric that measures the dividend as a percent of the current stock price. Many academic studies show that dividends account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.

Colgate-Palmolive in Focus

Headquartered in New York, Colgate-Palmolive (CL) is a Consumer Staples stock that has seen a price change of 21.74% so far this year. The consumer products maker is paying out a dividend of $0.5 per share at the moment, with a dividend yield of 2.06% compared to the Soap and Cleaning Materials industry's yield of 2.44% and the S&P 500's yield of 1.6%.

In terms of dividend growth, the company's current annualized dividend of $2 is up 4.7% from last year. Over the last 5 years, Colgate-Palmolive has increased its dividend 5 times on a year-over-year basis for an average annual increase of 3.02%. Future dividend growth will depend on earnings growth as well as payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. Right now, Colgate-Palmolive's payout ratio is 57%, which means it paid out 57% of its trailing 12-month EPS as dividend.

CL is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2024 is $3.53 per share, representing a year-over-year earnings growth rate of 9.29%.

Bottom Line

From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. But, not every company offers a quarterly payout.

High-growth firms or tech start-ups, for example, rarely provide their shareholders a dividend, while larger, more established companies that have more secure profits are often seen as the best dividend options. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. With that in mind, CL presents a compelling investment opportunity; it's not only an attractive dividend play, but the stock also boasts a strong Zacks Rank of #2 (Buy).

Zacks Names "Single Best Pick to Double"

From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.

It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time.

This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.

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Colgate-Palmolive Company (CL) : Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.