Dividend Aristocrats In Focus: Kimberly-Clark

Up to date on January thirtieth, 2025 by Bob Ciura

Traders on the lookout for high-quality dividend progress shares ought to take a more in-depth have a look at the Dividend Aristocrats, a gaggle of 69 firms within the S&P 500 Index with 25+ consecutive years of dividend will increase.

With this in thoughts, we created an inventory of all of the Dividend Aristocrats.

You possibly can obtain the total spreadsheet of all 69 Dividend Aristocrats, together with a number of essential monetary metrics reminiscent of dividend yields and price-to-earnings ratios, by clicking on the hyperlink under:

Disclaimer: Positive Dividend shouldn’t be affiliated with S&P International in any approach. S&P International owns and maintains The Dividend Aristocrats Index. The data on this article and downloadable spreadsheet relies on Positive Dividend’s personal evaluate, abstract, and evaluation of the S&P 500 Dividend Aristocrats ETF (NOBL) and different sources, and is supposed to assist particular person buyers higher perceive this ETF and the index upon which it’s based mostly. Not one of the info on this article or spreadsheet is official knowledge from S&P International. Seek the advice of S&P International for official info.

We evaluate every of the Dividend Aristocrats yearly, and the following inventory on this 12 months’s version is client merchandise big Kimberly-Clark (KMB).

Kimberly-Clark has raised its dividend for 52 consecutive years. It is usually a member of the much more unique Dividend Kings record.

The inventory additionally at present has a 3.9% dividend yield, which is roughly 3x the ~1.3% common dividend yield of the S&P 500 Index.

This text will focus on Kimberly-Clark’s enterprise mannequin, progress potential, and whether or not the inventory is at present buying and selling at a gorgeous valuation.

Enterprise Overview

Kimberly-Clark traces its beginnings again to 1872. 4 younger businessmen, John A. Kimberly, Havilah Babcock, Charles B. Clark, and Frank C. Shattuck, got here up with $30,000 of start-up capital to kind Kimberly, Clark and Co.

Right this moment, Kimberly-Clark is a worldwide client merchandise firm that operates in 175 international locations and sells disposable client items, together with paper towels, diapers, and tissues.

It operates by way of two segments that every home many common manufacturers: Private Care Phase (Huggies, Pull-Ups, Kotex, Rely, Poise) and the Shopper Tissue section (Kleenex, Scott, Cottonelle, and Viva), producing over $20 billion in annual income.

Supply: Investor Presentation

Kimberly-Clark posted third quarter earnings on October twenty second, 2024, and outcomes had been combined. The corporate noticed the highest line fall 4% year-on-year to $5 billion, and that missed estimates by $50 million.

Adjusted earnings-per-share fared higher, beating expectations by 12 cents at $1.83. The corporate famous greater costs for private care merchandise.

Whereas that boosted revenue margins on these merchandise, it additionally drove shoppers to lower-priced alternate options, which is why gross sales fell.

Administration famous pricing will increase had been required in inflationary economies reminiscent of Argentina to assist offset enter and working prices. Adjusted revenue margins rose 90 foundation factors to 36.7%.

Progress Prospects

Kimberly-Clark has dedicated to elevating its core manufacturers as one of many three pillars of progress within the coming years. It’ll do that by launching totally different product improvements through extensions of present traces and completely new merchandise.

The corporate will even proceed to handle its income through pricing and blend in addition to promotional methods.

The second progress pillar is accelerating progress in its growing and rising (D&E) markets, which comprise a good portion of the corporate’s gross sales.

KMB will concentrate on its private care {and professional} segments specifically, with its most important alternatives coming from locations the place it has low class penetration and frequency of utilization.

Kimberly-Clark additionally continues to pursue price financial savings. Kimberly-Clark’s administration workforce has repeatedly prolonged this initiative, aiming for an additional $1.5 billion of cumulative financial savings over a three-year interval.

Administration has publicly said targets of mid-single-digit progress in adjusted earnings-per-share yearly, -1% to +3% natural gross sales progress, and dividend progress in-line with earnings-per-share progress.

We anticipate 4.5% annual earnings progress within the years to return, as we anticipate volumes to stay largely regular over time.

Aggressive Benefits & Recession Efficiency

Kimberly-Clark’s most essential aggressive benefits are its manufacturers and world scale. The corporate enjoys a management place throughout its model portfolio and, certainly, the world over.

It retains its aggressive benefits by way of advertising and innovation. This enables the corporate to remain forward of the competitors. Given its dedication to its progress pillars, we anticipate this can solely improve over time.

As well as, Kimberly-Clark’s world attain gives the corporate with the effectivity to maintain prices low. The continued price discount program is an instance of its capability to successfully handle prices, at the same time as income grows.

Kimberly-Clark stays extremely worthwhile, even throughout recessions. For instance, it carried out nicely by way of the Nice Recession of 2007-2009. Its earnings-per-share by way of the Nice Recession are proven under:

2007 earnings-per-share of $4.25
2008 earnings-per-share of $4.06 (4.5% decline)
2009 earnings-per-share of $4.52 (11% improve)
2010 earnings-per-share of $4.45 (1.5% decline)

As you may see, whereas Kimberly-Clark did see earnings decline in 2008 and 2010, it additionally registered a double-digit progress price in 2009.

The rationale for its sturdy efficiency over the course of the recession is that the corporate sells merchandise that buyers want no matter financial situations.

Shoppers will at all times want private care merchandise, whatever the situation of the financial system. This provides Kimberly-Clark a sure degree of product demand annually, even throughout recessions.

Valuation & Anticipated Returns

Based mostly on adjusted earnings-per-share of $7.30 for 2024, Kimberly-Clark trades for a price-to-earnings ratio of 18.0.

Excluding outlier years, Kimberly-Clark has traded at a median price-to-earnings ratio of ~18 during the last decade. That is additionally our estimate of honest worth for the inventory.

Subsequently, shares look like pretty valued proper now, that means valuation shouldn’t be anticipated to issue into shareholder returns.

Future returns might be generated from earnings progress and dividends. Given the corporate’s sturdy manufacturers and progress catalysts, common annual earnings progress of 4.5% is an affordable expectation. The inventory additionally has a 3.9% dividend yield.

In whole, we see annual returns of 8.4% over the following 5 years. This can be a stable anticipated price of return, however is just under our purchase threshold of 10%.

Ultimate Ideas

Kimberly-Clark is a high-quality firm with a various portfolio of sturdy manufacturers. It has optimistic progress prospects shifting ahead, and it’s an especially dependable dividend inventory.

Rising markets, price reductions, and share repurchases will spotlight future earnings progress.

Kimberly-Clark has elevated its dividend for over 50 years in a row and at present has a dividend yield of almost 4%. It, due to this fact, meets our definition of a blue-chip inventory, and it ought to proceed to ship regular dividend will increase annually.

If you’re all for discovering extra high-quality dividend progress shares appropriate for long-term funding, the next Positive Dividend databases might be helpful:

The key home inventory market indices are one other stable useful resource for locating funding concepts. Positive Dividend compiles the next inventory market databases and updates them month-to-month: