Welcome to this series where I will be reviewing all the Dividend Kings and providing an overview and valuation calculation on the companies. Dividend Kings are a rare breed of Dividend Growth Companies. These companies have managed to raise their dividend for 50 or more years consecutively. Through all types of market swings, economic trouble, wars, recessions, these companies have seen it all and continue to reward shareholders with rising dividend income.
This week’s entry will focus on:
KMB – Kimberly-Clark Corporation
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Overview
Kimberly-Clark Corporation manufactures and markets personal care and consumer tissue products worldwide.
It operates through three segments:
- Personal Care – brands include Huggies, Pull-Ups, Little Swimmers, GoodNites, DryNites, Sweety, Kotex, U by Kotex, Intimus, Depend, Plenitud, Softex, Poise, and others
- Consumer Tissue – brands include Kleenex, Scott, Cottonelle, Viva, Andrex, Scottex, Neve, and others
- K-C Professional – brands include Kleenex, Scott, WypAll, Kimtech, and KleenGuard
Kimberly-Clark Corporation was founded in 1872 and is headquartered in Dallas, Texas.
(Source: Company Website)
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Metrics:
Dividend Amount: $4.64
Dividend Yield: 3.81%
5 Year Dividend CAGR: 3.82%
Payout Schedule: January, April, July, October
Dividend Payout Ratio: 87.88%
Years of Dividend Increases: 50 Years
P/E: 18.50
Analyst 5 Year Earnings Growth Estimate: 5.99%
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Valuation:
Current Price: $121.88 (9/15/22)
DCF (10% RRR): $95.64
P/E Mean Reversion: $115.16
Dividend Yield Theory: $141.46
Average of the three: $117.42
Analyst 1 year Price Target: $133.12
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Commentary:
Kimberly-Clark is a global manufacturer and distributor of consumer personal care and tissue products. You may not be familiar with the company name, but I am certain you have at least a few of their products in your home. The company has been in business for 150 years and per their website sells brands in more than 175 countries around the world. In fact, they state that a fourth of the global population uses their products each day.
KMB has raised its dividend for 50 years, which makes them one of the newest Dividend Kings. This is a very consistent company with brands that are consumed and replaced regularly. The current yield at 3.81% is solid but their 5 year dividend CAGR is only 3.82%, which is a little on the low end but a solid combination for such a reliable name. This dividend CAGR is in line with the company’s projected earnings growth. The payout ratio is currently high but the company is forecasted to grow earnings over the next year and a half, which will reduce the payout ratio.
The company’s revenue has been up over the past 5 years with total revenue rising from $18.5B in 2018 to $20.1B today, with a major increase starting in 2021, most likely due to the pandemic related rebound, but net income has not been as consistent, with the bottom line variable throughout that time. The stock has increased only 0.78% over the past 5 years, compared to the S&P’s return of 56.89%. Over the past year the stock is down 10.90% compared to the S&P being down 12.48%.
The company is facing headwinds on the cost of goods sold as inflation and supply chain disruptions have caused the input pricing to go up more than the company can raise prices.
KMB has provided a consistent and stable dividend, but the company has struggled both in company growth and share price appreciation over the past five years. Their products are universally used but the industry has very little organic growth, and will probably only grow the same as GDP and population growth. While I own the company I am not adding additional shares and have turned off the dividend reinvestment to allocate those funds to better opportunities. The current dividend growth and capital appreciation is not currently attractive to me as an investment. That said, the consistency and length of dividend payments shows that this may be a good option for your portfolio if you feel like the company can continue to grow their business.
Disclosure: I own shares of KMB.