Last update on 2024-06-27

Kimberly-Clark (KMB) - Dividend Analysis (Final Score: 6/8)

Analyze Kimberly-Clark (KMB) dividend policy: 6/8 score. Insightful performance, stability with 25 years of payouts and annual increases.

Short Analysis - Dividend Score: 6

We're running Kimberly-Clark (KMB) against the 8-criteria scoring system to evaluate the performance and stability of a company's dividend policy.

The dividend analysis examines Kimberly-Clark's dividend policy using eight scoring criteria: dividend yield, dividend growth rate, payout ratio, dividend coverage by earnings and cash flow, dividend stability, long-term dividend payments, and stock repurchases. KMB scored a 6 out of 8, which indicates a fairly strong dividend performance overall.

Insights for Value Investors Seeking Stable Income

Based on the analysis, KMB appears to be a solid stock for dividend-focused investors. Its high dividend yield, consistent growth, and long history of payouts are positive. However, the slightly high payout ratio and mixed coverage by earnings indicate the need for caution. It's worth considering for those prioritizing steady income, but keeping an eye on associated risks is advisable.

For those who are interested in delving deeper into the specifics, the subsequent section provides a comprehensive exploration of the criteria.

Dividend Yield Higher than the Industry Average?

Dividend yield is an important criterion for investors seeking a steady income from their investments. It measures the annual dividend payout as a percentage of the stock price. A high dividend yield is often attractive because it suggests that the company returns a large proportion of its profits to shareholders, providing a stable income stream. It's critical to compare a company's dividend yield to its industry average to understand its competitiveness.

Kimberly-Clark's (KMB) dividend yield of 3.8845% stands significantly higher than the industry average of 1.82%. Over the last 20 years, KMB's dividend yield has fluctuated yet remained predominantly above the industry average. For example, in 2004, the dividend yield soared to 4.0571%, and in 2008, it reached a peak of 4.399%. Even with occasional dips, such as in 2014 (2.8182%), it continued to compare favorably against industry benchmarks. Presently, at 3.8845%, KMB's yield supports its position as an attractive option for dividend-focused investors. This trend can be perceived as positive, as the company continues to offer robust returns relative to its stock price. However, it's also essential for investors to consider the sustainability of these yields given the pure-stock price movements and broader market conditions.

Average annual Growth Rate higher than 5% in the last 20 years?

The Dividend Growth Rate criterion examines whether the dividends that a company pays out have increased by an average of at least 5% every year over a specified time period. A higher dividend growth rate signifies a strong company performance.

The provided data indicates varying annual Dividend Per Share Ratios for Kimberly-Clark over the past 20 years, with some exceptional peaks like the approx. 96% growth in 2004 and lows like the approx. -33% decline in 2005. The Average Dividend Ratio over these years stands at approximately 8.63%, which exceeds the 5% benchmark and indicates a positive overall growth trend. This suggests that Kimberly-Clark has generally been able to increase its dividend payouts, reflecting healthy financial performance and stability. Hence, this trend is good for the Dividend Growth Rate criterion.

Average annual Payout Ratio lower than 65% in the last 20 years?

Payout ratio, representing the percentage of earnings paid to shareholders as dividends, ideally remains below 65% to ensure sustainability and capacity to reinvest in business growth.

Over the past 20 years, Kimberly-Clark (KMB) has an average payout ratio of approximately 68.27%. This figure exceeds the ideal threshold of 65%. Although there are several years, such as 2003 (39.16%) and 2011 (56.17%), where the payout ratio was well within the desirable range, other years such as 2015 (127.28%) and 2022 (90.39%) saw significantly higher payout ratios. This elevated payout ratio could suggest potential vulnerability in maintaining future dividend payments without affecting the company's reinvestment capacity. Given that the average payout ratio is just slightly over the threshold, it is a moderately negative indicator, demonstrating that while KMB is committed to return value to shareholders, it may strain its financial resources, especially in leaner years.

Dividends Well Covered by Earnings?

The criterion entails examining if the dividends paid out to shareholders are adequately covered by the company's earnings per share. It is crucial as it indicates the sustainability of the dividend payouts.

Analyzing the data from 2003 to 2023 for Kimberly-Clark (KMB) reveals mixed trends in the coverage of dividends by earnings per share (EPS). Generally, a coverage ratio above 1 suggests that the earnings are more than sufficient to cover dividends. The values mostly oscillate between 0.39 and 1.27 across the years, noting a few significant variations. For instance, a high coverage ratio of 1.27 in 2015 indicates strong earnings relative to dividends, which is beneficial for dividend sustainability. Conversely, a low coverage ratio of 0.39 in 2003 reflects insufficient earnings to cover dividend payments, which could be a concerning sign of over-distribution or financial strain. From 2010 to 2023, the coverage ratio ranges from 0.56 to 0.90, suggesting that while the dividends are covered, they are often only marginally so, implying potential risks if earnings decline. Kimberly-Clark should hence focus on bolstering its earnings growth to ensure more robust dividend coverage continually. Overall, while dividends are generally covered, the relatively low coverage ratios point towards a conservative approach to future dividend growth unless backed by stronger earnings performance. Investors might view this as a tentative or cautious level of dividend sustainability.

Dividends Well Covered by Cash Flow?

Dividends being well covered by cash flow implies that the company generates enough cash to comfortably pay its dividends. This is crucial as relying too much on borrowed funds or asset sales to pay dividends isn't sustainable and can harm the company's financial health.

Looking at Kimberly-Clark's historical trend from 2003 to 2023, except for 2015 where the ratio was above 1 implying dividends exceeded the free cash flow (dividing 1250M$ dividends by 1230.9M$ free cash flow), the company's coverage ratios oscillate between approximately 0.31 and 0.92. Comparing these, a significant dip happened in 2011 showing only a 27% coverage rate, indicating potential payout stress. The healthier coverage is seen when free cash flow coverage is around or above 60%. 2023 shows a lower but usually stable sign of 0.572, reducing financial risks. This trend is acceptable generally, showing that in most years, upward free cash ensures divided continuity which is positive but barely met in riskier board thresholds.

Stable Dividends Since the Company Began Paying Dividends?

Stable dividends over the past 20 years ensure consistent income for investors, making the stock attractive to income seekers.

Analyzing the dividend per share data for Kimberly-Clark (KMB) from 2003 to 2023, we see a consistent upward trend. Beginning at $1.3039 in 2003 and reaching $4.72 in 2023, the dividends have shown a steady increase, demonstrating strong financial health and commitment to returning value to shareholders. Importantly, there was no year in which the dividend per share dropped by more than 20%, indicating a robust and reliable dividend policy. This stability is beneficial for income-seeking investors as it provides a predictable and growing income stream. Overall, this trend is positive and highlights Kimberly-Clark’s capability to generate stable earnings to support and grow its dividend payouts.

Dividends Paid for Over 25 Years?

Checking if dividends have been consistently paid for over 25 years is crucial because it indicates a company's financial stability and commitment to returning value to shareholders, signaling reliability and confidence.

The data shows that Kimberly-Clark (KMB) has paid dividends consistently over the past 25 years, consistently increasing its dividend per share from $0.9588 in 1998 to $4.72 in 2023. This trend is highly positive, demonstrating both financial stability and a strong commitment to shareholder returns. Consistently increasing dividends over such a long timeframe reflects the company's robust earnings power and management's confidence in generating future cash flows. Hence, Kimberly-Clark's long history of dividend payments is an encouraging sign for investors seeking stability and income.

Reliable Stock Repurchases Over the Past 20 Years?

Criterion: Reliable Stock Repurchases Over the Past 20 Years

The number of shares for Kimberly-Clark (KMB) has shown a declining trend over the last 20 years, from 508,768,769 shares in 2003 to 337,800,000 shares in 2023. The majority of these years (17 out of 20) exhibited stock repurchasing activity, which indicates a reliable repurchase program. The average repurchase rate is -2.0147%. This trend of reducing the number of shares is favorable as it signals the company's commitment to enhance shareholder value through buybacks. Lower shares outstanding generally lead to higher earnings per share (EPS), benefiting existing shareholders. Overall, the consistency in stock repurchases suggests sound capital allocation strategies by the management.