After suffering a share price decline of nearly 30% over a two-year period that began in April 2016, the Kimberly-Clark Corporation (NYSE:KMB) has recovered all those losses and pushed its share price to new all-time highs to reaffirm its reputation of delivering robust long-term total returns.
In addition to the share price advancement, Kimberly-Clark has been paying dividends for more than eight decades. Moreover, the company has boosted its annual dividend distribution for more than half that time. As a component of the S&P 500 Index with a record of more than 25 consecutive annual dividend boosts, Kimberly-Clark is one of just 57 S&P 500 Dividend Aristocrats.
After missing Wall Street analysts’ earnings expectations in the last quarter of 2018, Kimberly-Clark has beaten Wall Street analysts’ earnings expectations in each of the first three quarters of the current year. The company’s most recent financial report on October 22, 2019 revealed a marginal revenue uptick but higher-than-expected quarterly earnings.
Third-quarter total net sales increased 1% year-over-year to $4.6 billion. While the overall volume decreased 1%, net selling prices increased 4% and product mix improved 1%, which resulted in net sales organic growth of 4%. The $1.94 net income per diluted share was significantly higher than the $1.29 figure from the same period last year. Adjusted earnings per share (EPS) increased 7.6% from $1.71 one year ago to $1.84 for third-quarter 2018 and beat the $1.80 analysts’ earnings expectations by 2.2%.
The company still expects diluted net income per share for full-year 2019 between $5.75 and $6.00. However, in light of strong results for the first three periods, the company raised its organic sales growth expectation from the original 3% to the 3% to 4% range for full-year 2019. The company also upped its expected adjusted EPS by $0.10 per share from the previous $6.65 to $6.80 range. The new adjusted EPS expectation for the full year is from $6.75 to $6.90. The company also reiterated its commitment to pursuing longer-term balanced and sustainable growth opportunities as part of its Strategy 2022 initiative.
The company boosted its quarterly dividend distribution most recently in second-quarter 2019. The quarterly payout increased 3% from a $1.00 payout in the second quarter last year to the current $1.03 distribution. This new dividend amount corresponds to a total annual dividend payout of $4.12 and a 3.1% forward dividend yield. The share price increase over the past year suppressed the current yield slightly below the company’s 3.22% five-year yield average.
While marginally trailing its own five-year average, Kimberly-Clark is managing to outperform the 2.01% average yields of its peers in the Consumer Goods sector by 55%. Compared to the 1.76% simple average yield of its peers in the Personal Products industry segment, Kimberly-Clark’s current yield is 78% higher. With the fourth highest yield in the group, Kimberly-Clark even outperformed by 6.5% the 2.94% average yield of the segment’s dividend-paying companies alone.
The total annual dividend has risen 60-fold since the current streak of 47 consecutive dividend hikes began in 1973, and it has maintained an average annual growth rate of 9.1% over that period. While the growth rate diminished slightly over the past two decades, the company still has managed to advance its annual dividend payout four-fold since 1999 for an average annual growth rate of 7.1%.
After riding a two-year downtrend, the Kimberly-Clark stock reached its five-year low in April 2018. Since hitting that low, the share price advanced higher, recovered all its losses between mid-2016 and April 2018, as well as reached several new all-time highs over the past 90 days.
Following a direction reversal in mid-2018, the share price entered the trailing 12-month period on a relatively steady uptrend with minimal volatility. Riding this uptrend and affected by the overall market correction in late 2018, the share price hit its 52-week low of $106.85 on December 24, 2018. However, after that brief dip, the share price resumed its uptrend.
From its December low, the share price advanced nearly 34% before topping out at its most recent all-time high of $142.74 on August 19, 2019. However, since this peak, the share price has pulled back slightly to close on November 18, 2019 at $131.63. The 8% pullback from the peak level pushed the share price from 3% above the $138.86 analysts’ current average target price to its current level, which means that the share price now has 5.5% room on the upside before it returns to the analysts’ target average.
While nearly below the recent peak level, the Nov. 18 closing price is nearly 20% higher than it was one year ago and 23.2% above the 52-week low from late 2018. The two-year decline from mid-2016 to mid-2018 limited the share price growth to just 13% over the last five years.
However, rising dividend distributions contributed more than half of the stock’s 33% total return over the past five years. The combined gains from asset appreciation and dividend income delivered a total return of nearly 23% just over the trailing 12-month period. Furthermore, the three-year total return reached nearly 28%.
Kimberly-Clark Corporation (NYSE:KMB)
Founded in 1872 and headquartered in Dallas, Texas, the Kimberly-Clark Corporation manufactures and markets personal care, consumer tissue and professional products. The company has manufacturing operations in 35 countries and sells its products in almost 180 countries. The Personal Care segment offers disposable diapers and baby wipes, as well as feminine and incontinence care products. Kimberly-Clark distributes these products under multiple brand names, including Huggies, Pull-Ups, Little Swimmers, GoodNites, DryNites, Kotex, Depend and Poise. Under the Consumer Tissue segment, the company provides facial and bathroom tissues, paper towels, napkins and related products under the Kleenex, Scott, Cottonelle, Viva and other brand names. The K-C Professional segment offers wipes, tissues, towels, apparel, soaps and sanitizers under the Kleenex, Scott, WypAll, Kimtech and Jackson Safety brands.
Ned Piplovic is the assistant editor of website content at Eagle Financial Publications. He graduated from Columbia University with a Bachelor’s degree in Economics and Philosophy. Prior to joining Eagle, Ned spent 15 years in corporate operations and financial management. Ned writes for www.DividendInvestor.com and www.StockInvestor.com.