Dividend Aristocrats In Focus: Kimberly-Clark

Up to date on January twenty seventh, 2024

Traders searching for high-quality dividend development shares ought to take a more in-depth take a look at the Dividend Aristocrats, a gaggle of 68 firms 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 68 Dividend Aristocrats, together with a number of necessary monetary metrics reminiscent of dividend yields and price-to-earnings ratios, by clicking on the hyperlink beneath:

Disclaimer: Certain Dividend isn’t affiliated with S&P World in any method. S&P World owns and maintains The Dividend Aristocrats Index. The knowledge on this article and downloadable spreadsheet is predicated on Certain 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 traders 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 World. Seek the advice of S&P World for official info.

We assessment every of the Dividend Aristocrats yearly, and the following inventory on this yr’s version is shopper merchandise large Kimberly-Clark (KMB).

Kimberly-Clark has raised its dividend for 52 consecutive years. Additionally it is a member of the much more unique Dividend Kings listing.

The inventory additionally at the moment has a 4% dividend yield, which is greater than double the ~1.6% common dividend yield of the S&P 500 Index.

This text will focus on Kimberly-Clark’s enterprise mannequin, development potential, and whether or not the inventory is at the moment buying and selling at a sexy 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 world 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 in style manufacturers: Private Care Phase (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 fourth quarter and full-year earnings on January twenty fourth, 2024. Adjusted earnings-per-share got here to $1.51, which was three cents mild of estimates. Income was flat year-over-year at $4.97 billion. Natural gross sales have been up 3% throughout the quarter, attributable to a 2% acquire in pricing and a 1% tailwind from favorable product combine.

Development Prospects

Kimberly-Clark has dedicated to elevating its core manufacturers as one of many three pillars of development within the coming years. It can do that by launching totally different product improvements by way of extensions of present traces and fully new merchandise. The corporate may even proceed to handle its income by way of pricing and blend in addition to promotional methods.

The second development pillar is accelerating development 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 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 staff has repeatedly prolonged this initiative, aiming for one more $1.5 billion of cumulative financial savings over a three-year interval.

We anticipate 5% annual earnings development within the years to come back, as we anticipate volumes to stay largely regular.

Aggressive Benefits & Recession Efficiency

Kimberly-Clark’s most necessary aggressive benefits are its manufacturers and international 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 development pillars, we anticipate this may solely improve over time.

As well as, Kimberly-Clark’s international attain supplies the corporate with the effectivity to maintain prices low. The continued value discount program is an instance of its potential to successfully handle prices, at the same time as 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 beneath:

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 development charge in 2009. The explanation for its sturdy efficiency over the course of the recession is that the corporate sells merchandise that customers want no matter financial situations.

Customers will all the time want private care merchandise, whatever the situation of the financial system. This provides Kimberly-Clark a sure degree of product demand every year, even throughout recessions.

Valuation & Anticipated Returns

Based mostly on adjusted earnings-per-share of $6.85 for 2024, Kimberly-Clark trades for a price-to-earnings ratio of 17.7.

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 truthful worth for the inventory. Subsequently, shares seem like barely undervalued proper now.

If the inventory valuation expands from 17.7 to 18 over the following 5 years, it is going to enhance annual returns by 0.3% per yr.

As well as, future returns can be generated from earnings development and dividends. Given the corporate’s sturdy manufacturers and development catalysts, common annual earnings development of 5% is an affordable expectation. The inventory additionally has a 4.0% dividend yield.

In whole, we see annual returns of 9.3% over the following 5 years. It is a stable anticipated charge of return, however is slightly below our purchase threshold of 10%.

Closing Ideas

Kimberly-Clark is a high-quality firm with a various portfolio of sturdy manufacturers. It has optimistic development prospects transferring ahead, and it’s an especially dependable dividend inventory. Rising markets, value reductions, and share repurchases will spotlight future earnings development.

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

In case you are occupied with discovering extra high-quality dividend development shares appropriate for long-term funding, the next Certain Dividend databases can be helpful:

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