This Dividend King Was Removed From the S&P 100. Here's Why It's a Great Buy for Long-Term Investors Anyway.

Colgate-Palmolive was removed from the S&P 100 on Sept. 21 because its roughly $69 billion market capitalization was surpassed by faster-growing companies, but it remains in the S&P 500 and should retain broad index-fund ownership. Analysts forecast EPS to rise at a 17% CAGR from $2.63 in 2025 to $4.22 in 2028, supporting its $2.12 annual dividend and 2.4% forward yield. At about $86 per share, the stock trades near 22x next-year earnings, with growth expected from Hill's pet nutrition, premiumization, emerging-market sales, and AI-led optimization.

Analysis

The index change is mechanically immaterial to CL’s liquidity, but it reinforces a more important market signal: mega-cap quality screens are rewarding secular growth and leaving staples dependent on execution to defend premium multiples. At roughly 22x forward earnings, CL needs sustained high-single-digit organic sales growth, gross-margin retention and continued Hill’s mix gains; the implied multi-year EPS trajectory leaves little room for an emerging-market FX reversal or a return to promotional intensity in household/personal care.

The better relative setup is within staples rather than versus AI: Hill’s gives CL a differentiated premium-pet growth lever, while oral care has unusually durable category economics and global distribution advantages. However, premium pet-food demand is increasingly exposed to trade-down if unemployment rises, and input-cost deflation could be competed away through promotions rather than retained as margin. Over the next 1-3 months, quarterly organic volume, price/mix, Hill’s growth and constant-currency margin are the relevant catalysts; over 6-18 months, the thesis depends on whether emerging-market growth converts into local-currency volume rather than inflation-driven pricing.

Consensus may be too quick to treat CL as a recession hedge at any price. Defensive inflows can support the shares during a risk-off episode, but a staples-wide multiple reset driven by easing rates reversing, weak volumes, or renewed dollar strength would overwhelm the modest index-flow benefit. A credible break in the thesis would be two consecutive quarters of negative volume in key categories, Hill’s decelerating below company growth, or FY guidance relying predominantly on price rather than volume/mix.

Key Decisions for Investors

• No event-driven trade on the index deletion: expected passive selling from OEF-related products is too small relative to CL’s normal liquidity and S&P 500 ownership.
• Initiate a 6-12 month long CL / short KMB pair only if the relative valuation premium remains within its recent range: CL has the cleaner premium-pet and emerging-market mix, while KMB is more exposed to mature-category volume and promotional pressure. Target 8-12% relative return; exit if CL volume turns negative for two quarters or the pair moves 7% against entry.
• For a defensive sleeve, buy CL on a 5-8% pullback rather than chase current valuation; use a 12-month 10-12% upside target predicated on stable margins and high-single-digit Hill’s growth. Size modestly because the downside case is multiple compression toward the broader staples group if organic growth slows.
• Monitor quarterly constant-currency organic sales, category volumes, Hill’s segment growth, gross margin and USD/BRL/MXN moves. A guidance cut tied to FX or a shift from volume-led to price-led growth should trigger reassessment or closure of long exposure.