It’s time to take a close look at Kimberly Clark stock and the Kimberly Clark stock dividend.
Because Kimberly Clark operates in a competitive business climate. And they face stiff competition in the retail consumer goods segment.
Is the dividend safe? Is Kimberly Clark a good stock to buy? Are Kimberly Clark’s shares reasonably priced? What do their business prospects look like?
Kimberly Clark Stock Dividend Analysis
To answer these questions, let’s run Kimberly Clark through a dividend stock review. I want to check out what is going on with the Kimberly Clark stock dividend. And answer all of the questions I just asked.
And before you go, be sure to check out all of the stocks in our model portfolio. It’s a great group of stocks for dividend income.
Kimberly Clark Company Background
Kimberly Clark is organized into three operating segments. The segments are based on product groupings.
It’s hard to get through the day without touching one of their products or a similar product marketed by a competitor.
So let’s first review what Kimberly Clark develops, manufactures, and sells to us as a consumer.
Personal Care Brands
Included in this segment are solutions and products such as disposable diapers, training, and youth pants, swim pants, baby wipes, feminine and incontinence care items.
These products are sold under many brand names some of which include:
- Little Swimmers
Products in the consumer tissue segment mainly include facial and bathroom tissue, paper towels, and napkins.
Let’s call this what it really is: kleenex, toilet paper, and napkins. Nothing fancy here, but the type of stuff we all use every day. And as you might know, there has been an increased demand for toilet paper used in homes.
Kimberly Clark brands in this area include:
The K-C Professional segment partners with businesses and institutions. They put Kimberly Clark products into the workplace.
Products like wipers, tissue, towels, apparel, soaps, and sanitizers. You may have seen Kimberly Clark towel and soap dispensers in your workplace bathrooms.
These brands include:
- Jackson Safety
Revenue Share By Business Segment
The chart below shows the share of Kimberly Clark’s revenue by these 3 business segments.
Chart 1: Kimberly Clark Revenue By Segment
Kimberly Clark Stock Symbol
Finally, for the interested investor. The Kimberly Clark stock symbol is “KMB”. And KMB stock trades on the New York Stock Exchange.
Disclosure: This post contains referral links.
Kimberly Clark Business Strategy
Kimberly Clark will turn 150 years old in 2022.
They have devised a business strategy around this anniversary date called K-C Strategy 2022. The strategy assumes that category growth will remain modest. Similar to conditions in recent years.
From their strategy, Kimberly Clark’s mid-term financial objectives are as follows:
- Sales growth – 1 to 3 percent annually
- Earnings per share growth – mid-single digits annually
- Return On Invested Capital – maintain at the current level
- Dividend growth – in line with earnings per share growth
This is not a spectacular growth story. We are not going to get filthy rich investing in this company.
However, it is nice to see the dividend growth objectives mentioned in the strategic plan. So let’s talk more about the dividend next. I love digging into the dividend details for a company.
Kimberly Clark Dividend Rate Per Share
Kimberly Clark stock pays an annual forward dividend of $4.56 per share.
What does the annual forward dividend mean? It is simply the last approved dividend rate per share. Multiplied by the number of times a company pays dividends each year.
Kimberly Clark Dividend Yield
Based on the recent KMB stock price, that payout puts the Kimberly Clark dividend yield at 3.4%.
According to the Simply Investing Report, KMB’s average dividend yield, over the last 20 years is 3.24%. So, it’s running close to the long-term average.
More about Simply Investing a little later. Let’s stay with the dividend metrics for right now. Because making money from company paid dividends is what it’s all about!
How Often Does Kimberly Clark Pay Dividends?
KMB dividends are paid 4 times per year. It is a quarterly dividend stock. And follows a typical dividend payment pattern that many U.S. based stocks use.
When Are Kimberly Clark’s Dividends Paid?
Kimberly Clark pays dividends in January, April, July, and October. The dividend is paid during the first week of these months.
And be sure to check out this article. If you are looking for quarterly dividend payments starting in March of each year.
When Is KMB’s Ex-Dividend Date?
Are you a potential new shareholder? Or someone looking to make an add on investment to your current KMB shares?
If that is the case, you may want to receive the next dividend payout. To increase your dividend income right away. If so, complete your investment BEFORE the ex-dividend date.
Kimberly Clark’s ex-dividend date falls in the month PRIOR to when it pays dividends. Furthermore, it comes at the beginning of those months.
Depending on how the calendar falls. The dividend dates are always a little different.
So, refer to Kimberly Clark’s website for the precise dates. Or its most recent quarterly press release announcing the company’s next dividend payment.
Kimberly Clark Dividend History
Kimberly Clark has been increasing its stock dividend every year since 1973. That’s a nice long streak of annual dividend increases.
A Dividend Aristocrat
This streak makes Kimberly Clark a Dividend Aristocrat. An Aristocrat has increased dividends for at least 25 years in a row. Furthermore, I do not expect the string of annual dividend increases to be broken any time soon. Which means…
We Have A Soon To Be Dividend King
In fact, I expect KMB to become a Dividend King shortly. Dividend Kings have increased their dividends each year for 50 straight years!
Companies that have achieved Dividend King status are great additions to any dividend income portfolio. For the reliable dividend income, they provide.
Kimberly Clark Dividend Growth
Dividend growth rates have slowed across the consumer goods sector. Kimberly Clark is no exception to this trend.
Table 1: Kimberly Clark 7-Year Compound Annual Dividend Growth Rate
|1 Year||3 Years||5 Years||7 Years|
The low to mid-single-digit percent increases are similar to what P&G and Clorox have been delivering.
Kimberly Clark Dividend Increase
On the other hand, the trend improved for this year. Management announced a 6.5% increase early in the year.
So, better dividend growth is likely a sign of positive business fundamentals. More on the business metrics in a moment. One last word about the dividend…
Kimberly Clark Dividend Policy
I like it when a company has clearly stated plans for future dividend payments. Not all companies do this. But, Kimberly Clark does not disappoint me here.
They state in their mid-term financial objectives that they plan to “generally increase the dividend in line with earnings per share growth”.
So, let’s look at the financial metrics to see what they tell us…
Kimberly Clark Revenue
Until last year, revenue growth had been nonexistent. On an absolute basis, it bounced around $18 billion for several years.
Chart 2: Kimberly Clark 7-Year Revenue Trend
Branded consumer products businesses have faced major headwinds. Organic growth rates have been weak as consumers shift to lower-cost private label products.
Furthermore, about 50% of revenue is generated outside the US. There is stiff competition from local brands in these foreign markets. And foreign currency translation has been a headwind at times.
Fortunately, the trend is to spend more time at home. At that trend has increased demand for the company’s products. Translating to higher revenues. At least for the time being.
Kimberly Clark Dividend Payout Ratio & Earnings
Recent accounting earnings have been a little choppy. 2018 included a large one-time charge for a global cost reduction program. Absent that charge, 2018 earnings would have been similar to 2017.
Chart 3: Kimberly Clark Dividends & Earnings Per Share
It is good to see the company restructuring and taking costs out of their system. This will better align with the realities of the global marketplace. And serve to offset any potential negative effects of commodity price inflation.
With the restructuring charge out of the way and savings from this program kicking in, projected earnings look more than sufficient to cover the dividend.
With that said, Kimberly Clark’s dividend consumes about two-thirds of earnings. This is more commonly known as the dividend payout ratio.
Kimberly Clark Free Cash Flow
I also like to check a company’s dividends against free cash flow.
Chart 4: KMB Dividends & Cash Flow
The Kimberly Clark dividend payout ratio has run at 66% of free cash over the past 3 years.
It appears they have plenty of cash flow to cover their dividends. And excess cash beyond the dividend goes to share repurchases.
Kimberly Clark Credit Rating
Kimberly Clark has an A2 and A credit rating from Moody’s and S&P, respectively.
Table 2: Credit Rating Evaluation Grid
These ratings represent “investment grade-low credit risk”. This is a solid sign of financial stability and the company’s ability to pay its obligations as they come due.
Furthermore, be sure to keep an eye on your own credit score. You can do so for free using Credit Karma.
Kimberly Clark Financial Position
The company employs large amounts of financial leverage. They finance nearly 100% of assets with debt and other liabilities.
Contributing to the financial leverage is the company’s use of cash to retire outstanding stock from the market each year. This is also known as share buybacks.
Share buybacks are great to see. But I actually would prefer if some of this cash was allocated to dividend growth.
However, I do not see any change in capital allocation practices based on Kimberly Clark’s strategic plan.
Finally, the use of financial leverage is not a big concern for me as it relates to Kimberly Clark’s stock. They have a stable demand for their products. And a long history of consistent earnings and cash flow generation.
Apparently Moody’s and S&P see it similarly. They assign investment-grade credit ratings to the company.
Kimberly Clark Dividend Safety
I base my judgment on dividend safety using the information discussed so far.
- Business fundamentals
- Dividend yield
- Dividend payout ratios
- Historical dividend track record
- Credit ratings
- Financial position
Whether you look at the company’s growing dividend payout against accounting earnings or free cash flow, it looks well covered. No issues here.
Other than the use of financial leverage, all areas point to adequate dividend safety. So, I consider Kimberly Clark’s dividend safe from a reduction for the foreseeable future.
But, will the dividend continue to grow?
Kimberly Clark Dividend Growth Forecast
I make a dividend growth projection for every dividend growth stock that I own.
The projection helps me judge if Kimberly Clark’s shares are reasonably priced. Furthermore, it sets an expectation from which I can compare future dividend increases. Finally, it helps me plan for my future dividends to fund living expenses.
To make my forecast, I look at:
- Historical dividend growth
- Dividend payout ratios
- Management’s dividend policy when provided
- Business fundamentals
- Company growth strategy
Kimberly Clark allows for making a dividend income growth forecast simple. According to their strategic plan, they expect to grow earnings in the mid-single-digit percentages each year. And their desire is to grow the dividend at the same rate as earnings.
Putting these pieces together, I expect a 4-6% future annual dividend growth rate from Kimberly Clark stock.
Kimberly Clark Stock Valuation
Next up, Kimberly Clark stock valuation.
Are Kimberly Clark’s Shares Reasonably Priced?
Investors are usually willing to pay a high price for the current dividend, dividend safety, and steady dividend growth Kimberly Clark stock offers. Oftentimes, slow and steady stocks come at a premium price.
2 good rules to follow in investing are 1) never significantly overpay for a stock. And 2) keep your investment costs low.
I follow rule #2 by trading stocks for free. To so, I use the Webull app. It’s free, fast, and easy to use.
As for the stock valuation, the methods I discuss below give a range of values. But based on my analysis and experience, I judge Kimberly Clark’s shares to be slightly overvalued at this time.
Let’s dive deeper by looking at value in several different ways.
Kimberly Clark Dividend Discount Model
The single-stage dividend discount model considers several factors I have discussed thus far.
- The current annual dividend payment
- Projected dividend growth
- My desired annual return on investment – 9%
Using these assumptions, the dividend discount model calculates the stock’s fair value at $120 per share.
Morningstar Fair Value Estimate
The investment analysis firm Morningstar believes Kimberly Clark stock to be reasonably priced at $124 per share. Morningstar calls this their fair value estimate.
Kimberly Clark Stock Price To Earnings Ratio
Kimberly Clark’s stock price to earnings ratio checks in at about 20 times last year’s earnings. This is a pretty high value for a slow-growth stock.
Valuation From The Simply Investing Report
Let’s check in with Simply Investing to see what they think. Since I subscribe to the Simply Investing report.
Simply Investing provides a great analysis of company prospects for dividend investors. And, it is an excellent resource for quality dividend stock investment ideas and recommendations.
The Simply Investing Report has strict rules to judge a stock’s value. Those rules are:
- Stock price to earnings ratio must be 25 or below
- The current dividend yield must be higher than the average dividend yield over the past 20 years
- Stock price to book ratio should be 3 or less
If a stock meets these 3 rules, it is considered a good value. Otherwise, it is considered overvalued.
Currently, Kimberly Clark stock is considered overvalued by the Simply Investing Report.
Finally, the Simply Investing Report is an excellent resource. It crunches all the numbers for you. And recommends what dividend stocks are the best buys each month. I use the report to augment my own research.
Kimberly Clark Dividend Stock Analysis Wrap Up
Kimberly Clark stock holds a small position in my dividend stock portfolio. It is also a holding in this popular dividend stock exchange-traded-fund that I own.
Is Kimberly Clark A Good Stock To Buy?
Kimberly Clark, a soon to be Dividend King, is one of the most stable stocks you can invest in. Although, I think it is trading at a slightly overvalued price.
I plan to hold and would be very interested in adding to my position at or below $115 per share. That price will provide a 4% dividend yield with the potential for 4-6% annual dividend growth.
As for stocks in the consumer goods sector, I also like Clorox. Clorox has better-differentiated products, in my opinion. And they dominate the categories in which they compete.
In contrast, Kimberly Clark’s products tend to be more commoditized. And subject to greater pricing pressures.
Other Articles & Resources Related To Kimberly Clark Stock & Dividend Investing
- Procter & Gamble stock and dividend analysis
- Clorox stock and dividend analysis
- 11 stocks paying dividends in April
My Favorite Dividend Investing & Finance Resources
|Simply Investing for dividend stock recommendations|
|Webull for free app-based stock trading|
|M1 Finance: great for IRA accounts|
|Personal Capital for managing your total financial picture|
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