Kimberly-Clark Corporation (KMB) Stock Dividend Analysis
This dividend stock has delivered an average annual total return of 2.80% over the past decade.
Earnings per share have grown at an average pace of 3.40% annually. The company has also has repurchased 3% of its outstanding stock annually on average since 2001. For FY 2010, analysts expect the company to earn $4.95/share, which is higher than 2009’s EPS of $4.52. For FY 2011 analysts expect Kimberly-Clark to earn $5.36/share. As with other consumer products companies, the growth is likely to come from developing and emerging markets, rather than developed markets. Developed markets could benefit from cost cutting and efficiency profits, which would decrease the total price of doing business. Commodity prices could be detrimental to total costs at the company, as is the competitive nature of developed markets in which Kimberly-Clark does business.
The annual dividend payment per share has increased by an average of 9.30% annually, which is much higher than the growth in earnings. A 9% growth in dividends translates into the payment doubling every almost eight years. Kimberly-Clark has managed to double its distributions almost every eight years on average since 1986.
The return on equity has fluctuated between a low of 25.70% in 2006 and a high of 39.4% in 2009. Over the past few years it has remained above 30%, which is impressive.
The dividend payout ratio has been on the rise over the past decade, increasing from a low of 32.30% in 2000 to a high of 60% in 2006. Currently it is at 53%. The increase is mostly due to the faster rate of increase in dividends, whereas earnings growth has been somewhat sluggish. A lower payout is always a plus, since it leaves room for consistent dividend growth minimizing the impact of short-term fluctuations in earnings.
Currently Kimberly-Clark (KMB) is attractively valued at 13.30 times earnings, has an adequately covered dividend payment and yields 4%. Despite the fact that the company has grown slowly over the past decade, it could easily catch up over the next few years, which would make it a worthwhile investment. Add in the consistency of dividend increases and the stock buybacks, and you have a shareholder friendly management which is something hard to find these days.
Full Disclosure: Long KMB
Dividend Growth Investor