Smart Dividend Portfolio Edition #49: Hygiene Leadership
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Dear Investor,
Welcome to the 49th edition of TipRanks’ Smart Dividend Portfolio & Newsletter.
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Market-Moving News: February 24, 2025
Another eventful week saw main stock indexes close in the red. The Dow Jones Industrial Average (DJIA) dropped by 2.51%, while the S&P 500 (SPX) lost 1.66%. Meanwhile, the tech benchmarks Nasdaq Composite (NDAQ) and Nasdaq-100 (NDX) registered weekly declines of 2.51% and 2.26%, respectively.
The first part of the holiday-shortened week saw the S&P 500 reach its second and third record highs this year. However, sentiment took a hit after Walmart’s muted guidance added fuel to investor worries over the economic outlook, sparked by weaker-than-expected data, the prospects of a trade war, and ongoing geopolitical uncertainties.
Walmart’s 2026 fiscal year projections pushed stocks sharply lower on Thursday, weighing heavily on the Dow and the broader consumer-related stock universe. The retail giant projected lower-than-expected sales in the ongoing fiscal year due to “uncertainties related to consumer behavior and global economic and geopolitical conditions.” Additionally, on Friday, the blue-chip index was rattled by news that the U.S. Department of Justice is investigating UnitedHealth’s Medicare billing practices.
Still, other major indexes remained flat to moderately higher, supported by mega caps, with both Nasdaq benchmarks reaching intraday all-time highs early on Friday. However, concerns over the impact of slowing economic growth on earnings, coupled with elevated stock valuations, triggered profit-taking, pushing all key indexes deep into negative territory by Friday’s close. Market volatility was significantly amplified by the magnitude of this month’s options expiry, as approximately $2.7 trillion in U.S. stock market derivatives tied to equities and ETFs expired on Friday.
Currently, analysts remain largely unshaken, with opinions regarding last week’s market developments ranging from “consolidation” to “the beginning of a healthy correction.” Given the strong two-year rally, a correction is to be expected. Moreover, the shift in market leadership this year – where defensives such as Consumer Staples, Utilities, and Healthcare have replaced cyclicals like Technology and Communication Services at the market’s helm – could provide a new catalyst for continued gains.
Several recent economic reports revealed cracks in the economy’s resilience. January’s housing market index fell to a five-month low, housing starts declined, and existing home sales dropped. Meanwhile, S&P Global reported that U.S. service-sector activity entered contraction territory, with its lowest PMI reading in over two years, overshadowing a continued rebound in manufacturing activity.
Analysts have also raised concerns over the effect of the Trump administration’s sweeping federal layoffs on the job market, adding to worries about consumption growth that were first sparked by Target, widely seen as a retail bellwether. These concerns were underscored by January’s consumer sentiment index, which fell to its lowest reading since November 2023, as household inflation expectations surged amid fears that tariffs would drive up prices.
President Trump announced his intent to impose additional tariffs on automobiles, pharmaceuticals, and lumber products as soon as April 2nd, signaling that these tariffs would be set at 25%. Transportation and airline stocks were particularly hard-hit, while rising policy uncertainty – combined with signs of economic weakness – pressured the broader market.
The Federal Reserve’s recent meeting minutes indicated that policymakers were prepared to hold rates steady, citing a “high degree of uncertainty” surrounding the economic outlook. Rate committee members expressed concerns about potential inflationary pressures stemming from the proposed tariffs and strong consumer spending.
However, the recent softness in economic data may force the central bank’s hand. Although many analysts caution that one set of data points does not necessarily reflect the economy’s overall health, mentions of “stagflation” – an economic condition characterized by low growth and high inflation – are becoming more frequent. A series of weaker-than-expected data points could increase the likelihood of further monetary support, as a slowdown in consumption might help curb inflation.
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This Week’s Quality Dividend Stock Idea
Kimberly-Clark (KMB) is a global consumer goods company specializing in producing and marketing personal care products. Its portfolio includes well-known brands such as Huggies, Kleenex, Scott, and Kotex. With a presence in over 30 countries, the company distributes its products through retail, e-commerce, and commercial channels, serving both developed and emerging markets. Through continuous innovation and strategic expansion, KMB has cemented its status as a household name in hygiene and wellness.
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Pioneering Innovation and Expansion
Founded in 1872 as a paper manufacturer in Neenah, Wisconsin, Kimberly-Clark eventually evolved into a trailblazer in disposable consumer products. The launch of Kotex sanitary napkins in 1920 and Kleenex facial tissues in 1924 set the stage for its dominance in personal care and hygiene.
The post-World War II era saw KMB leverage advancements in nonwoven fabrics, leading to the introduction of Huggies diapers in 1968 – an industry-defining move that fueled revenue growth. The 1980s and 1990s were marked by global expansion and strategic acquisitions, including the 1995 purchase of Scott Paper, which solidified its leadership in tissue products and strengthened its competitive position against Procter & Gamble.
Entering the 21st century, KMB expanded its footprint in emerging markets, capitalizing on rising consumer demand in Asia and Latin America. Investments in automation and supply chain efficiencies enhanced profitability, while premium and sustainable product innovations, such as eco-friendly tissue and diaper lines, aligned with shifting consumer preferences.
Facing cost pressures in the 2020s, the company launched multiple restructuring initiatives, emphasizing cost-saving measures and digital transformation to bolster margins. In early 2023, KMB divested its Personal Protective Equipment (PPE) business to Ansell for $640 million, shedding the Kimtech and KleenGuard brands. Later that year, it exited the private-label diaper segment, including its partnership with Costco’s Kirkland Signature brand, to concentrate on high-margin premium products under its own brands, such as Huggies.
Today, with a market capitalization of $44 billion and annual revenues of approximately $20.4 billion, Kimberly-Clark is ranked #198 on the Fortune 500 list.
Strategic Mergers and Acquisitions
Kimberly-Clark’s acquisition strategy focuses on streamlining operations and concentrating on core, high-margin segments. The company aims to enhance its portfolio by acquiring businesses that align with its core strengths and offer growth potential.
As a part of this vision, KMB has executed multiple strategic acquisitions to enhance its market position, expand into new regions, and strengthen its product portfolio. In 2022, the company acquired a majority stake in Thinx, a company specializing in feminine and general-use hygiene products.
While the company has made several acquisitions to drive growth, it has also strategically divested non-core or lower-margin assets to focus resources on more profitable areas. In 2023, KMB completed the sale of its Neve tissue brand and related consumer and K-C Professional tissue assets in Brazil.
In 2024, the company announced a strategic reorganization with a goal to enhance agility, drive growth, and improve profitability. Furthering this strategy, last April Kimberly-Clark agreed to sell its Personal Protective Equipment business to Ansell, which allowed KMB to concentrate on its primary consumer and professional brands.
By refining its portfolio through targeted acquisitions and divestments, Kimberly-Clark aims to strengthen its market position and focus on areas with the highest growth and return potential.
A Consumer-Driven Financial Model
Kimberly-Clark’s financial model centers on producing and marketing essential personal care and tissue products, prioritizing efficiency and value creation. In March 2024, the company restructured into three segments: North America (NA), International Personal Care (IPC), and International Family Care and Professional (IFP). This reorganization aims to streamline operations and boost innovation.
KMB’s North America (NA) segment generates over half of the company’s total net annual sales. This division is responsible for 11 of the company’s powerhouse brands across consumer and professional categories. Kimberly-Clark owns 12 powerhouse brands that hold the number one or strong number two positions in their respective markets. These brands collectively account for over 80% of the company’s net sales.
The International Personal Care (IPC) segment includes Baby & Child Care, Feminine Care, and Adult Care, with over half of the division’s sales coming from five key markets: China, South Korea, Brazil, Australia & New Zealand, and Indonesia. The company is focusing on building market share in these fast-growing end markets, while conducting leaner operations in more mature ones.
Kimberly-Clark’s International Family Care and Professional (IFP) segment includes its tissue products (like toilet paper and paper towels) and professional hygiene products (such as those used in workplaces, hospitals, and public facilities) outside North America. This segment prioritizes operational efficiency and brand strength to drive international growth in tissue and professional hygiene products.
KMB derives over 55% of its total net sales from North America. In the region, Walmart remains a key retail partner for Kimberly-Clark, representing approximately 14% of its total sales in 2024.
The company’s transformation strategy, introduced early last year, aims to drive long-term growth by focusing on innovation, efficiency, and restructuring. A significant portion of this strategy involves investing in R&D to enhance its powerhouse brands. Additionally, cost-saving initiatives, including supply chain optimizations, are projected to deliver $3 billion in cost savings and $500 million in working capital improvements.
With the newly structured business segments, the company expects to improve agility and operational effectiveness, targeting $200 million in administrative savings. The company’s long-term financial objectives include organic sales growth outpacing the market and mid-to-high single-digit adjusted EPS growth, positioning it for sustained profitability and shareholder value creation.
Financial Performance and Outlook
Over the past three years, the company’s revenues and earnings have grown at a CAGR of 4.7% and 11.9%, respectively. In Q4 2024, KMB operated under its new three-segment structure for the first full quarter. Net sales declined 0.8% year-over-year to $4.9 billion, while adjusted earnings slipped 0.7% to $1.50 per share, narrowly missing analyst expectations of $1.51 per share on $4.85 billion in revenue.
For the full year, total revenues fell 1.8% to $20.1 billion, while adjusted EPS surged 11.1% to $7.30 due to cost savings and organic growth in adjusted operating profit. Looking ahead to FY25, KMB’s adjusted EPS is expected to grow mid-to-high single digits on a constant-currency basis, despite a combined 4.2% impact from divestitures, higher interest expenses, and a rising tax rate. For reference, analysts are expecting its annual EPS to rise by 3.2% year-over-year to $7.58.
The company projects adjusted FCF of over $2 billion in FY25, compared to $2.7 billion in FY24. Capital expenditures are set to increase to a range of $1 billion to $1.2 billion from $720 million in FY24, driven by supply chain enhancements, automation, and proprietary innovation investments.
KMB’s ability to drive earnings growth and strong free cash flow (FCF) lies in its pricing power, brand strength, and global distribution network. The company consistently implements cost-saving initiatives, such as its FORCE (Focused On Reducing Costs Everywhere) program, which enhances margins through supply chain efficiencies and automation.
While the company exhibits a notably high debt-to-equity ratio compared to its industry peers, it demonstrates a strong capacity to service its debt obligations. KMB’s interest coverage ratio is ranked among the top 40% in the industry and indicates that it can service its debt obligations easily.
In 2024, the company paid down more than $500 million in debt, keeping its net debt-to-EBITDA ratio below 2x, in line with high-rated companies. S&P Global Ratings affirmed Kimberly-Clark’s ‘A’ long-term issuer credit rating last year.
Maximizing Shareholder Value
Kimberly-Clark has consistently increased its dividend for 53 consecutive years, securing its place as a Dividend Aristocrat. Over the past five years, the company has grown its dividend at a CAGR of 3.26%. The company maintains manageable payout ratios, which coupled with its robust finances and strong profitability, leads analysts to foresee continued dividend growth at 3-4% annual rate.
KMB’s current dividend yield of 3.68% is considerably higher than the sector average of 2.55%. Reaffirming its commitment to shareholder returns, KMB recently announced a 3.3% increase in its quarterly dividend to $1.26 per share, payable on April 2nd.
In addition to dividends, KMB actively repurchases shares to enhance shareholder value. In 2024, the company repurchased 7.2 million shares for $1 billion, with ~32 million shares still available under its 2021 repurchase authorization.
The company is currently trading at a price-to-earnings ratio of 17.7x, slightly above the sector median but below its peers, suggesting potential undervaluation. With strong return metrics, including ROIC, ROA, and ROE ranking among the top in the industry, Kimberly-Clark continues to be a compelling long-term investment.
Investing Takeaway
Kimberly-Clark is a strong long-term investment, backed by its iconic brands, consistent dividend growth, and disciplined financial strategy. As a dividend aristocrat with a 3.65% yield and steady buybacks, it remains committed to shareholder value. Despite near-term headwinds, KMB’s pricing power, cost-saving initiatives, and premium product situates it nicely for future growth.
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Dividend Investor Portfolio
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Portfolio News
▣ BlackRock’s (BLK) Bitcoin ETF (IBIT) now controls 50.4% of all U.S. Bitcoin ETF holdings, valued at over $56.8 billion, according to Dune data. This represents a staggering level of dominance, given that the total ETF market manages $112 billion.
▣ EOG Resources (EOG) is expected to announce its Q4 results on February 28. Analysts have projected the company to report earnings of $2.58 per share, an estimated decline of 15.9% year-over-year on revenues of $5.9 billion, a projected drop of 7.8% year-over-year. The company has raised its guidance in FY24 for oil production volumes by 800 barrels to 491.1 barrels per day at midpoint, natural gas liquids by 2,800 days to 247.8 million barrels per day, and natural gas by 24 million standard cubic feet per day (MMcfd) to 1,944.
▣ Edison International (EIX) is expected to announce its Q4 results on February 27. Wall Street analysts expect EIX to report EPS of $1.09, compared to core EPS of $1.28 in the same period last year. Revenues are projected to be $3.92 billion in the fourth quarter, an estimated growth of 5.9% year-over-year. The company has projected FY24 core EPS of $4.9 at midpoint.
▣ VICI Properties (VICI) announced mixed fourth-quarter results. The company’s Q4 revenues increased by 4.7% year-over-year to $976.1 million, surpassing consensus estimates of $974.4 million. VICI reported adjusted funds from operations (AFFO) of $0.57 per share, compared to $0.55 per share in the same period last year. For reference, analysts were expecting an AFFO of $0.67 per share. For the full year, the company’s revenues surged by 6.6% year-over-year to $3.85 billion while its AFFO per share grew by 5.1% year-over-year to $2.26. Looking ahead, in FY25, VICI has projected AFFO per share of $2.34 at midpoint, falling short of Street estimates of $2.73 per share.
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Recent Trades
None at the moment, although we are considering adding a stock to our portfolio when the market conditions allow for an attractive entry point. Stay tuned.
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Portfolio Attributes
| Dividend Portfolio Yield |
Expected Dividend Growth | Expected Annual Income |
| 3.81% | +9.29% | $5,761.23 |
| Yield-on-Cost Adjusted, Weighted |
Average Analyst 12-Month Growth Outlook | 10K Per Stock at the Time of Purchase |
Current Portfolio
| Name | EX-Dividend Date | Payment Date | Yield on Cost | Annual DPS |
| Automatic Data Processing (ADP) | Mar 14, 2025 | Apr 01, 2025 | 2.46% | $6.16 |
| Allianz SE ADR (ALIZY) | May 09, 2025 | May 28, 2025 | 5.79% | $1.52 |
| Amgen (AMGN) | May 16, 2025 | Jun 09, 2025 | 3.27% | $9.52 |
| BlackRock (BLK) | Mar 07, 2025 | Mar 24, 2025 | 2.56% | $20.84 |
| Edison International (EIX) | Mar 28, 2025 | Apr 30, 2025 | 5.12% | $3.31 |
| EOG Resources (EOG) | Apr 17, 2025 | Apr 30, 2025 | 3.06% | $3.92 |
| IBM (IBM) | May 09, 2025 | Jun 10, 2025 | 3.13% | $6.68 |
| JPMorgan Chase (JPM) | Apr 04, 2025 | Apr 30, 2025 | 2.86% | $5.00 |
| Kroger (KR) | May 15, 2025 | Jun 02, 2025 | 2.82% | $1.28 |
| LyondellBasell (LYB) | Mar 10, 2025 | Mar 17, 2025 | 5.62% | $5.36 |
| PepsiCo (PEP) | Mar 07, 2025 | Mar 31, 2025 | 3.64% | $5.44 |
| Philip Morris (PM) | Mar 21, 2025 | Apr 09, 2025 | 6.06% | $5.40 |
| Qualcomm (QCOM) | Mar 06, 2025 | Mar 27, 2025 | 2.25% | $3.40 |
| VICI Properties (VICI) | Mar 21, 2025 | Apr 04, 2025 | 5.19% | $1.72 |
| ExxonMobil (XOM) | May 14, 2025 | Jun 10, 2025 | 3.64% | $3.96 |
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Click here for more stock market analysis from TipRanks Macro & Markets research analyst Yulia Vaiman
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Disclaimer
The information contained in this article represents the views and opinions of the writer only, and not the views or opinions of TipRanks or its affiliates and should be considered for informational purposes only. TipRanks makes no warranties about the completeness, accuracy, or reliability of such information. Nothing in this article should be taken as a recommendation or solicitation to purchase or sell securities. Nothing in the article constitutes legal, professional, investment, and/or financial advice and/or takes into account the specific needs and/or requirements of an individual, nor does any information in the article constitute a comprehensive or complete statement of the matters or subject discussed therein. TipRanks and its affiliates disclaim all liability or responsibility with respect to the content of the article, and any action taken upon the information in the article is at your own and sole risk. The link to this article does not constitute an endorsement or recommendation by TipRanks or its affiliates. Past performance is not indicative of future results, prices, or performance.
