Yahoo Finance Kimberly-Clark's (NYSE:KMB) Shareholders Will Receive A Bigger Dividend Than Last Year
Kimberly-Clark Corporation (NYSE:KMB) will increase its dividend from last year's comparable payment on the 5th of July to $1.18. This will take the annual payment to 3.3% of the stock price, which is above what most companies in the industry pay.
Check out our latest analysis for Kimberly-Clark
Kimberly-Clark's Dividend Is Well Covered By Earnings
A big dividend yield for a few years doesn't mean much if it can't be sustained. The last payment made up 80% of earnings, but cash flows were much higher. In general, cash flows are more important than earnings, so we are comfortable that the dividend will be sustainable going forward, especially with so much cash left over for reinvestment.
Over the next year, EPS is forecast to expand by 28.2%. If the dividend continues along recent trends, we estimate the payout ratio will be 65%, which would make us comfortable with the sustainability of the dividend, despite the levels currently being quite high.
Kimberly-Clark Has A Solid Track Record
The company has an extended history of paying stable dividends. Since 2013, the annual payment back then was $2.96, compared to the most recent full-year payment of $4.72. This means that it has been growing its distributions at 4.8% per annum over that time. Slow and steady dividend growth might not sound that exciting, but dividends have been stable for ten years, which we think makes this a fairly attractive offer.
Dividend Growth May Be Hard To Achieve
Investors could be attracted to the stock based on the quality of its payment history. However, Kimberly-Clark has only grown its earnings per share at 2.7% per annum over the past five years. Slow growth and a high payout ratio could mean that Kimberly-Clark has maxed out the amount that it has been able to pay to shareholders. When the rate of return on reinvestment opportunities falls below a certain minimum level, companies often elect to pay a larger dividend instead. This is why many mature companies often have larger dividend yields.
Our Thoughts On Kimberly-Clark's Dividend
Overall, we always like to see the dividend being raised, but we don't think Kimberly-Clark will make a great income stock. The company is generating plenty of cash, but we still think the dividend is a bit high for comfort. We don't think Kimberly-Clark is a great stock to add to your portfolio if income is your focus.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 2 warning signs for Kimberly-Clark that investors should take into consideration. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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