The Market Knocked This Dividend Stock Down 13%. I'm Not Complaining, I'm Buying.

Investors have every right to be perturbed by the consumer staples sector. At a time when the sector should be living up to its defensive profile, it's betraying investors' trust.

Over the past month, the Consumer Staples Select SPDR ETF (NYSEMKT: XLP), the bellwether exchange-traded fund (ETF) in the category, is down nearly 8%. No, there aren't guarantees of anything when markets turn turbulent, but when economic data is concerning and the U.S. is engaged in military conflict, this should be one of the ETFs to buy.

However, it's been anything but that. Why? And is there an opportunity for investors here?

This consumer staples stock has been beaten up too severely. Image source: Getty Images.

Some of its components are in even deeper slumps. Just look at Colgate-Palmolive (NYSE: CL). That consumer staples stock is down 13.6% over the past month, confirming that it's in a correction and that it's behaving -- in a bad way -- more like a high-octane growth stock than a sleepy, old-guard dividend payer. However, this spate of weakness could prove a buying opportunity for the maker of products like Ajax and Irish Spring.

The good and the bad of Colgate stock

There's no sugarcoating a 13.6% decline in just a month, and there's no skirting the point that Colgate faces some headwinds. One of those is rising prices for raw materials. Companies often address those by passing some of their higher costs onto consumers, but shoppers only have so much tolerance for that move.

The situation is further exacerbated by surging oil prices due to the war in Iran. Faced with higher prices at the pump, consumers may look for savings in the form of off-label household cleaners, soaps, and toothpaste.

On the brighter side, some market observers believe that, over the long term, Colgate can prove sturdy against challenges from both generic and niche competitors. There is some loyalty to its brands, particularly when the company and its consumers can find a "Goldilocks" pricing scenario.

Speaking of brand loyalty, Colgate enjoys that in fast-growing markets such as Brazil, China, and India, cementing its status as not only one of the largest consumer staples companies, but one of the most recognizable as well.

Other factors add to the case for Colgate's recent slide being an overreaction. For example, the company is coming off a year in which it posted record operating cash flow of $4.2 billion. It's also evolving with the times, leveraging artificial intelligence (AI) to drive both efficiency and product innovation.

The dividend is safe

Colgate's dividend is one of the primary reasons income investors consider the stock, with its yield currently at 2.5%. And to say the payout is sacrosanct is only a modest exaggeration: It's been hiked for 63 consecutive years. There's room for that streak to continue -- Colgate had $1.3 billion in cash on hand at the end of last year.

Further suggesting support for the payout, some analysts expect Colgate to dial back share repurchases in favor of reducing debt and returning capital to shareholders through the dividend.

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.