Up to date on October sixteenth, 2023 by Bob Ciura
Kimberly-Clark (KMB) has elevated its dividend for 51 consecutive years. Because of this, it has joined the checklist of Dividend Kings. The Dividend Kings are a bunch of simply 51 shares which have elevated their dividends for at the very least 50 years in a row.
We consider the Dividend Kings are among the many highest-quality dividend progress shares to purchase and maintain for the long run.
With this in thoughts, we created a full checklist of all 51 Dividend Kings. You’ll be able to obtain the total checklist, together with vital monetary metrics corresponding to dividend yields and price-to-earnings ratios, by clicking on the hyperlink beneath:
Kimberly-Clark is a worldwide chief in its trade and may proceed to develop its dividend annually, even throughout recessions.
This text will talk about the corporate’s enterprise overview, progress prospects, aggressive benefits, and anticipated returns.
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.
Immediately, Kimberly-Clark is a worldwide shopper merchandise firm that operates in 175 nations and sells disposable shopper items, together with paper towels, diapers, and tissues.
It operates segments that every home many widespread manufacturers: Private Care Phase (Huggies, Pull-Ups, Kotex, Rely, Poise) and the Shopper Tissue section (Kleenex, Scott, Cottonelle, and Viva), plus an expert section. In all, KMB generates ~$21 billion in annual income.
Supply: Investor Presentation
Kimberly-Clark posted second-quarter earnings on July twenty fifth. Adjusted earnings-per-share handily beat estimates by 17 cents, coming in at $1.65. Income elevated 1% year-over-year to $5.1 billion. Natural gross sales rose 5%, which was pushed by a 9% enhance in worth and favorable product combine. These had been partially offset by a 3% decline in quantity, and foreign exchange translation was an additional 4% headwind.
North America gross sales rose 6%, together with 6% natural gross sales progress. Gross margin rose 380 foundation factors to 34% of gross sales, pushed by larger income and price financial savings, which offset larger enter prices. Steering for the stability of the yr is for 3% to five% in natural gross sales progress.
Development 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 completely new merchandise. It could additionally leverage its sturdy manufacturers to extend costs over time.
It’s going to additionally use its important advertising investments to go after under-penetrated classes to drive market share positive factors and, finally, larger income and revenue.
Supply: Investor Presentation
The subsequent progress pillar is accelerating progress in its creating and rising (D&E) markets, which make up a good portion of the corporate’s gross sales. The corporate will give attention to its private care {and professional} segments particularly, with its largest alternatives coming from locations the place it has low class penetration and frequency of utilization.
The corporate’s give attention to D&E growth in Latin America and China particularly, with smaller markets, additionally seeing a significant push. Kimberly-Clark plans to make use of its important provide chain and advertising expertise to pursue progress in areas the place it underperforms at this time, which ought to assist drive some incremental progress.
Kimberly-Clark additionally continues to pursue value financial savings. It has grown its earnings-per-share because of share repurchases and price discount packages. Kimberly-Clark’s administration crew has prolonged this initiative to 2022, aiming for an additional $1.5 billion of cumulative financial savings over the three-year interval.
General, we count on 5% annual EPS progress over the subsequent 5 years.
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, internationally.
It retains its aggressive benefits by advertising and innovation. Kimberly-Clark spends over $1 billion yearly on promoting, and analysis and growth. This enables the corporate to remain forward of the competitors. Given its dedication to its progress pillars, we count on this may solely enhance over time.
As well as, Kimberly-Clark’s world attain gives the corporate with the effectivity to maintain prices low. The FORCE (Targeted On Decreasing Prices All over the place) program is an instance of its capability to handle prices, at the same time as income grows, and has seen years of success in lowering working prices.
Kimberly-Clark stays extremely worthwhile, even throughout recessions. For instance, it carried out nicely by the Nice Recession of 2007-2009. Its earnings-per-share by 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% enhance)
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 charge in 2009. The explanation for its sturdy efficiency over the course of the recession is that the corporate sells merchandise that buyers want no matter financial situations.
Customers will at all times want private care merchandise, whatever the situation of the financial system. This offers Kimberly-Clark a sure degree of product demand annually, even throughout recessions.
Valuation & Anticipated Returns
Primarily based on our adjusted earnings-per-share estimate of $6.35 for the fiscal yr 2023, Kimberly-Clark trades for a price-to-earnings ratio of 19.2.
Excluding outlier years, Kimberly-Clark has traded at a mean price-to-earnings ratio of about 19.0 during the last decade. That is additionally our estimate of honest worth for the inventory. The valuation has moderated considerably of late, however shares nonetheless commerce simply above our estimate of honest worth.
If the inventory valuation declines to 19.0 over the subsequent 5 years, it will cut back annual returns by 0.2% over the subsequent 5 years. As well as, future returns might be generated from earnings progress and dividends. We count on 5% annual EPS progress for Kimberly-Clark. The inventory additionally has a 3.9% dividend yield. In complete, we see annual returns of 8.7% over the subsequent 5 years.
Given the sturdy yield, 50+ yr historical past of dividend will increase, and average progress expectations, we charge the inventory a maintain for dividend progress buyers. The inventory will not be a purchase proper now, as complete anticipated returns are beneath 10%.
Closing 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 a particularly dependable dividend inventory. Rising markets, value reductions, and share repurchases will spotlight future earnings progress.
Kimberly-Clark has elevated its dividend for 50 years in a row and at the moment has a dividend yield of practically 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.
In case you are enthusiastic about discovering extra high-quality dividend progress shares appropriate for long-term funding, the next Certain Dividend databases might be helpful:
The key home inventory market indices are one other strong useful resource for locating funding concepts. Certain Dividend compiles the next inventory market databases and updates them month-to-month:
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