Dividend Aristocrats In Focus: Kimberly-Clark

Up to date on January thirtieth, 2025 by Bob Ciura

Buyers searching for high-quality dividend progress shares ought to take a better have a look at the Dividend Aristocrats, a gaggle of 69 corporations within the S&P 500 Index with 25+ consecutive years of dividend will increase.

With this in thoughts, we created a listing of all of the Dividend Aristocrats.

You’ll be able to obtain the complete spreadsheet of all 69 Dividend Aristocrats, together with a number of vital monetary metrics corresponding to dividend yields and price-to-earnings ratios, by clicking on the hyperlink under:

Disclaimer: Positive Dividend will not be affiliated with S&P World in any method. S&P World owns and maintains The Dividend Aristocrats Index. The data on this article and downloadable spreadsheet relies on Positive Dividend’s personal assessment, 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 data on this article or spreadsheet is official information from S&P World. Seek the advice of S&P World for official data.

We assessment every of the Dividend Aristocrats yearly, and the following inventory on this yr’s version is shopper 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 checklist.

The inventory additionally presently 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 presently buying and selling at a lovely 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 type Kimberly, Clark and Co.

In the present day, Kimberly-Clark is a worldwide shopper merchandise firm that operates in 175 international locations and sells disposable shopper items, together with paper towels, diapers, and tissues.

It operates via two segments that every home many standard manufacturers: Private Care Section (Huggies, Pull-Ups, Kotex, Rely, Poise) and the Shopper Tissue phase (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 have been blended. 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 increased costs for private care merchandise.

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

Administration famous pricing will increase have been required in inflationary economies corresponding to 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’s going to do that by launching completely different product improvements through extensions of present traces and fully 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 deal with its private care {and professional} segments particularly, 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 value financial savings. Kimberly-Clark’s administration crew has constantly prolonged this initiative, aiming for an additional $1.5 billion of cumulative financial savings over a three-year interval.

Administration has publicly acknowledged 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 count on 4.5% annual earnings progress within the years to return, as we count on volumes to stay largely regular over time.

Aggressive Benefits & Recession Efficiency

Kimberly-Clark’s most vital 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 via advertising and marketing and innovation. This enables the corporate to remain forward of the competitors. Given its dedication to its progress pillars, we count on this can solely enhance over time.

As well as, Kimberly-Clark’s world attain offers the corporate with the effectivity to maintain prices low. The continuing value discount program is an instance of its capability to successfully handle prices, whilst income grows.

Kimberly-Clark stays extremely worthwhile, even throughout recessions. For instance, it carried out effectively via the Nice Recession of 2007-2009. Its earnings-per-share via 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% enhance)
• 2010 earnings-per-share of $4.45 (1.5% decline)

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

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

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

Valuation & Anticipated Returns

Primarily based 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 mean price-to-earnings ratio of ~18 over the past decade. That is additionally our estimate of truthful worth for the inventory.

Due to this fact, shares look like pretty valued proper now, that means valuation will not be anticipated to issue into shareholder returns.

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

In complete, we see annual returns of 8.4% over the following 5 years. It is a strong anticipated charge of return, however is slightly below our purchase threshold of 10%.

Ultimate Ideas

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

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

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

In case you are all for discovering extra high-quality dividend progress shares appropriate for long-term funding, the next Positive Dividend databases can be helpful:

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