Yahoo Finance Kimberly-Clark's (NYSE:KMB) Upcoming Dividend Will Be Larger Than Last Year's
Kimberly-Clark Corporation (NYSE:KMB) has announced that it will be increasing its dividend from last year's comparable payment on the 5th of July to $1.18. This takes the dividend yield to 3.5%, which shareholders will be pleased with.
View our latest analysis for Kimberly-Clark
Kimberly-Clark's Dividend Is Well Covered By Earnings
We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Before this announcement, Kimberly-Clark was paying out 80% of earnings, but a comparatively small 69% of free cash flows. This leaves plenty of cash for reinvestment into the business.
The next year is set to see EPS grow by 27.2%. Under the assumption that the dividend will continue along recent trends, we think the payout ratio could be 65% which would be quite comfortable going to take the dividend forward.
Kimberly-Clark Has A Solid Track Record
The company has a sustained record of paying dividends with very little fluctuation. Since 2013, the dividend has gone from $2.96 total annually to $4.72. This implies that the company grew its distributions at a yearly rate of about 4.8% over that duration. 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
The company's investors will be pleased to have been receiving dividend income for some time. However, Kimberly-Clark has only grown its earnings per share at 2.7% per annum over the past five years. Kimberly-Clark's earnings per share has barely grown, which is not ideal - perhaps this is why the company pays out the majority of its earnings 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.
In Summary
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 would probably look elsewhere for an income investment.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. As an example, we've identified 1 warning sign for Kimberly-Clark that you should be aware of before investing. 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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