Tuesday, February 25, 2014

Stock Spotlight, Kimberly Clark Corp

Kimberly-Clark is a company that has been on my radar for awhile now as alluded to in my last months stock analysis post.  At the time I decided not to pull the trigger on KMB, instead opting to buy shares of Altria group.  Well, as a new month rolls around and the old war chest is filling up with new spoils I am once again considering this purchase.  I have been holding off on KMB recently hoping for a better entry price but as I sit on the sidelines the stock continues to chug right along leaving me out in the cold.  Lets take a look at KMB and see if it is worth these premium prices.

Kimberly Clark was founded in 1872 and was initially in the paper mills industry.  The company quickly evolved inventing cotton substitutes that eventually led to the first disposable feminine hygiene products.  The company is now famous for its brands which include Huggies diapers, Kotex feminine hygiene products, Kleenex brand tissues, and most recently its expansion into the health care industry.  KMB currently sits on a market cap of $41.73 billion which seats it in the top 20 non-cyclical consumer goods and services industry category.

Quick Stats:

  • 52 week range $91.44-$111.68
  • Current Price $109.99
  • P/E 19.88 
  • Dividend $0.84/3.05%
  • EPS 5.53
  • Inst Ownership 71%

KMB is currently trading near its 52 week and all time high.  It trades with a P/E ratio of 19.88 which is above the industry median of 18.11.  A dividend raise was announced today for KMB marking its 42nd straight year of an increase.  This is an increase of only 3.7% compared to last years raise of 9.5% which could indicate low expected sales growth.  KMB will pay out its dividend on April 2, 2014 with an ex dividend date of March 7, 2014.

While a yield rate of 3.05% does not seem too impressive by itself KMB has experienced tremendous growth rates at the same time.  Over the last five years KMB (growth of 129.18%) has managed to keep close to the S&P 500 (growth of 151%) in overall growth rates while still offering its dividend.  Compared to a company like AT&T which offers a juicy 5.72% dividend yield which has a total five year growth of 51.22% it becomes clear that dividend yield is not the only factor when selecting a stock.  KMB has also outpaced some of its major competition which can be seen below.

Figure 1: KMB's 5 Year Growth vs S&P 500 & Competition

   KMB is currently seeing stagnated growth in the United States but in emerging markets it is experiencing significant growth (6%) in its KC Professional line, (5%) in its personal care line, and declining growth overall in its health care business which is to be spun off (tax free) later in the year.  By removing this burden KMB should be able to focus on its core industry and growing its most profitable segments. 

I believe that KMB is making a good decision by spinning off its healthcare division and getting back to its basics.  I am personally long term bullish on KMB and believe that it will continue to grow its revenue from the emerging markets sector.  I would like to add one or two major consumer goods stocks to my portfolio as to me they are a hedge against any major recession.  While I am not one to predict calamities, one thing that I do know is that even when the markets are down diapers and feminine hygiene products are still required.    

Current watch list  (looking to purchase one in the next 2 weeks): CL, CLX, PG, KMB, JNJ 

What company is your current favorite in the non-cyclical consumer goods and services industry?


  1. I truly believe in invest in companies in products you use.

    I am interested in all those companies that you mentioned, but like you, i'm pondering at what entry price. However, I think PG is closest to their 52 week low. So of the ones you mentioned, maybe PG may be the one to get.

    However, KMB will eventually be two companies so maybe that's something to consider. Getting shares in the new created company might not be a bad thing, look at COP/PSX, MO/PM, KRFT/MLDZ.

  2. Thank you for stopping in Richie!

    I am very closely watching PG and have also added ENR to my short list.

    The company spin off is one of the major reasons I am scrutinizing KMB so much right now. I believe that it will be a boon for their main product lines but I am unsure of how successful their healthcare portion will be. With this tumultuous split occurring it did not surprise me to see a disappointing dividend raise this year. I still feel strongly about the KMB leadership and I would like to acquire shares within the near future.

    Take care!

  3. I own KMB in a ROTH IRA but only bought 6 shares at $62.62. Wish I loaded up back then!

    1. That is an amazing entry point for KMB, even at this high price I am still seriously considering picking up shares. I am really excited to see what happens when they spin off their health care division, hopefully you end up with two successful companies for the price of one. Thank you for stopping in swan and congratulations on the excellent gains with KMB.

      Take care.