Colgate Looks Pricey -- Are There Any Bargains Left?

Colgate-Palmolive (CL 1.38%) is set to go ex-dividend on July 16. In Wall Street's short attention span world, it's easy to lose the signal in the noise. It pays to focus on what matters, and what could matter more than the return to shareholders? A dividend is one of the most efficient ways for an investor to get paid, and Colgate is an all-time great dividend payer. In fact, Colgate has paid dividends without interruption since 1895 and increased its dividend payments for 51 consecutive years. 

Over the last decade, Colgate shareholders have seen their dividend nearly triple. In an age where many workers make do with sluggish wage growth, the kind of consistent dividend growth Colgate delivers is a welcome change of pace.  

CL Dividend data by YCharts

But this quality comes at a price, and today that price is in nose-bleed territory. Colgate's P/E sits at 30--that is a heady number for a large, low growth company, even one as high quality as Colgate. 

Whatever you think of Colgate's future and how long it will take for its quality to justify a high price, the bargain prices are behind us, at least for now. 

CL P/E Ratio (TTM) data by YCharts

This is a company that really does not get to any level that is classically cheap. Even during the financial crisis, Colgate's P/E was only cheap relative to the premium it generally commands. 

Where can investors find quality income at a cheaper price than Colgate? Colgate's yield is currently 2%, just a hair above the S&P 500's 1.9% yield. Two companies worth considering are Kimberly-Clark (KMB 1.66%) and Unilever (UL 1.58%), both of which offer higher yields than Colgate.  

Both Kimberly-Clark and Unilever offer substantially higher yields than Colgate. On top of that, investors pay much more attractive prices for those yields relative to Colgate's nose-bleed P/E ratio.

CL P/E Ratio (TTM) data by YCharts

This is a market environment where it's next to impossible to find stocks that are fundamentally cheap. However, there are relative bargains -- opportunities to improve your portfolio's income at cheaper prices relative to other stocks. Here we have such a case where both Kimberly-Clark and Unilever generate roughly 50% more dividend income for their investors. On a P/E basis, these companies' shares trade at around a third of the price of Colgate.

Its not as exciting as the bargainpalooza of 2009, but ~50% more income for a ~33% discount is an intriguing opportunity.