Income season is a great opportunity to get where the company is and where it can move forward. This earnings season has greater importance as a lot has changed over the past three months, which could put the company’s recent guidance in trouble.
Consumer Staple Food Giant Kimberley - Clark (NYSE: KMB) The results just reported were weaker and cut the full year outlook. The company has dozens of paper-centric everyday brands and professional products – from tissues and toilet paper to diapers and women’s products.
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Regardless of the economy, demand for Kimberley-Clark products has stabilized, allowing the company to raise dividends for 53 consecutive years, winning a coveted spot on the dividend king's list. As of this writing, the stock generated a huge 3.8% chunk, making it a reliable source of passive income.
That's why Kimberly-Clark can now buy reliable dividend stocks used to circumvent venture investors.
When Kimberly-Clark provides an initial 2025 outlook in late January, the tariff meetings are much less stressful.
The company initially expects organic sales growth in 2025 to exceed 2% in its competitive categories and countries average. After that, the guidance has been reduced to 1.5% to 2%. The most important guiding cut is adjusting for earnings per share (EPS) - compared to previous medium-to-high unit growth, it is expected to remain stable on a constant currency basis.
Kimberly-Clark also expects free cash flow (FCF) to be $2 billion, while earlier forecasts exceed $2 billion.
This boring growth is nothing new for long-term Kimberley-Clark investors. As you can see in the chart below, Kimberley-Clark's share price has stagnated over the past decade, with operating margins in the medium term range, and revenue has only risen moderately in recent years.
As my colleague Eric Volkman pointed out, companies should not use trade tensions as an excuse to achieve huge results. Kimberly-Clark's peer group has been underperforming for years.
Last year, the company launched a years-long dynamic care strategy that reorganized the company into three segments – North America, International Personal Care and International Home Care. This move is designed to simplify operations, enhance flexibility and simplify reporting structure. But, as Kimberly-Clark's latest guide suggests, the impact of motivational care strategies will take time to show its results.
Kimberly-Clark isn't the top spot in the game, and it's been a few years. However, the company does have some key factors that can attract risk-averse investors.
First, its dividend is reliable. Even with a $2 billion reduction in FCF guidelines, Kimberly-Clark can support its return on capital programs entirely with cash. In the last four months, it returned $466 million to shareholders through buybacks and dividends.
Second, Kimberly-Clark improved his balance sheet by reducing debt. Its long-term net debt was nearly 10 years low, reaching $6.7 billion.
Finally, Kimberley-Clark stock has a price of only 18.3, while the median is 23.1, which is priced at 18.3. Under this year's EPS guidance, Kimberly-Clark is still bargaining at these levels.
Kimberly-Clark may not grow rapidly, but it is not necessarily a bad thing for investors who are primarily focused on supplementary income. The stock is of high value compared to its more expensive industry peers.
For example, Procter & Gambling Another consumer staple dividend king, it has a smaller growth rate but earned a 2.7% yield at 26.7 p/e. For investors with priority quality, P&G is a better business and worth buying, but Kimberley-Clark is a better value and has higher passive income potential.
The company has deprived the well-known bandages by reducing growth forecasts this year. As expectations diminish, Kimberly-Clark had more room to surprise the upside. Meanwhile, a considerable 3.8% yield provides a worthwhile incentive for income investors to hold stocks.
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Daniel Foelber has no position in any of the stocks mentioned. Motley fool has no position in any stock mentioned. Motley Fool has a disclosure policy.
Tariff Trouble with this dividend king's rock rock high earnings spending was originally published by Motley Fool