Key Points
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Colgate-Palmolive has been a consumer defensive star in 2026.
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Its payout is dependable, as highlighted by the stock’s Dividend King status.
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The company’s third-quarter earnings update was impressive.
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It was a red October for the artificial intelligence (AI) trade as the tech-heavy Nasdaq-100 index slumped by 6.6%. That shift didn’t chase investors entirely out of the market, though. Rather, they rotated away from tech into the friendly confines of consumer staples.
In fact, some of the most familiar consumer defensive stocks are posting tech-esque returns of late. Just look at Colgate-Palmolive (NYSE: CL). A stock that many market participants know primarily as a Dividend King — thanks to its payout-hiking streak of at least 50 years — delivered an October performance that would make an AI stock blush, surging by 12.3%.
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That rally expanded Colgate-Palmolive’s year-to-date gain to 23.4%, a sizable lead over both its chief rival Procter & Gamble and the sector bellwether Vanguard Consumer Staples exchange-traded fund. The stock’s 2026 sturdiness is one reason buy-and-hold investors should consider shares of the toothpaste and soap giant before the end of this year.
An ideal “hold forever” stock
Some stocks are meant to be flirted with while others are worthy of dating, but there’s also a group to which investors can make long-term commitments. Colgate-Palmolive is in that camp. Sure, a dividend-hiking streak spanning 63 years bolsters the case for this stock as a long-term investment, but there’s more to the story.
Yes, consumer staples stocks are generating so much hoopla of late that the sector is, based on price-to-earnings (P/E) ratios, pricier than the information technology sector, but with Colgate-Palmolive, that higher cost of admission may prove justifiable. Obviously, it offers the benefit of one of the most dependably growing dividends in the U.S., along with all the volatility-reducing properties commonly associated with consumer defensive stocks.
For buy-and-hold investors, Colgate-Palmolive features other attractive points. Some of those market participants may still be too heavily allocated to growth stocks, so sprinkling some defensive stocks into their portfolios would be a smart way to enhance their diversification. And for investors sitting on cash as they fret about the AI trade’s effects on the broader market, Colgate-Palmolive offers superior long-term return prospects relative to money market accounts and short-term bonds.
Stock-specific fundamentals are there to support Colgate-Palmolive’s status as a buy-and-hold stock. In the third quarter, the company’s earnings per share rose by 3% while organic sales climbed 3.6%. As a result of that strength, the consumer staples company tightened its full-year revenue growth guidance range to 4% to 5% from its previous 2% to 6%, while noting that it now expects its gross profit margin to rise. Previously, it had been forecasting flat margins.
Cozy up to Colgate-Palmolive before 2027
Investors shouldn’t jump blindly into any stock simply because it’s on a torrid run, and that caution applies to Colgate-Palmolive. Market participants should apply scrutiny to all the names on their shopping lists.
Digging deeper into Colgate-Palmolive’s results will show that it experienced some lethargy in North America in the third quarter, but the company offset some of that with its vibrancy in global markets. Importantly, while consumers are rightly becoming more cost-sensitive due to higher inflation, Colgate-Palmolive has been able to pass some of its higher costs on to shoppers via price hikes without damaging brand loyalty.
There’s also talk that the company is considering selling some personal care brands, such as Irish Spring and Speed Stick. If true, that would confirm its willingness to be nimble while potentially raising a tidy sum of cash that could be used to reduce debt, for research and development, or to further reward shareholders.
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Todd Shriber has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Colgate-Palmolive. The Motley Fool has a disclosure policy.
