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A Closer Look at the Dividend of These Household Companies

August 26, 2014 | About:

The force of brand names cannot be overstated. The profit of having strong, generally enjoyed brands is that an organization can accomplish much higher margins than the seller of a nonexclusive item because customers are eager to pay more for higher quality. Kimberly-Clark (NYSE:KMB) is an illustration of an organization that owns such brands.

Strong brands are commonly a sign of a dividend stock, giving stability and ensuring that the dividend is overall supported. Kimberly-Clark has claim over brands such as Cottonelle, Kotex, Kleenex, Huggies, Depend and Pull-Ups. The organization sells its products across 175 countries.

The dividend

Kimberly-Clark pays an above-normal dividend yield contrasted with both the S&P 500 and similar companies in the form of Procter & Gamble, Johnson & Johnson, and Colgate-Palmolive.

On an annualized basis over 10 years, Kimberly-Clark has the lowest development rate of the pack, with Colgate having the highest. The majority of the companies, with the exception of Colgate, have slowed the dividend development in the course of recent years, likely because of the money-related crisis. However the interesting thing is that Kimberly-Clark's most recent dividend increase has more than completely recuperated to the 10-year normal. Colgate's most recent increase was significantly lower than either historical norm, as was Procter & Gamble's. Johnson & Johnson's most recent increase was slightly higher than the five-year rate yet far lower than the 10-year rate.

Presently, this may not mean much since dividend development might be wild at times. Colgate has the lowest yield when compared to the other three stocks under discussion, and it isn't developing the dividend all that much faster based on any of the three metrics under consideration.

Johnson & Johnson, Kimberly-Clark and Procter & Gamble are all identical in form. Every one of the three have yields around 3% and dividend development around 9%-11% yearly. Every one of the three have similar payout ratios.

Kimberly-Clark boasts of the highest yield of the three, and Procter & Gamble's yield is lifted because of a steep selloff in April. Pre-selloff P&G's yield was closer to 2.9%. How fast does Kimberly-Clark's dividend need to develop yearly through the one decade from now for the stock to be decently esteemed today?

Kimberly-Clark needs to develop its dividend by around 9.1% every year for the one decade from now for the stock to be reasonably esteemed today. This is a bit lower than its 10-year annualized development rate and the most recent dividend increase. Hence, if its performance in the future looks like it has performed in the past, then it is generally decently valued. For comparison, Johnson&Johnson is required to deliver 9.55% yearly dividend development, Procter&Gamble needs 9.5% yearly dividend development, and Colgate needs 13.5% yearly dividend development.


Colgate is unmistakably exaggerated; however, the other three stocks are generally decently esteemed today. The obliged development rate for every one of the three are close to the historical values, and if the past is any sign without bounds then the dividend should develop just fast enough to justify purchasing the stocks today. These three stocks are no bargains, on the other hand, and there are a lot of better options out there.

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