In a market that usually seems like a on line casino, it’s refreshing to search out shares that constantly ship spectacular outcomes 12 months after 12 months.
One such firm is Kimberly-Clark (NYSE: KMB), the buyer staples big behind iconic manufacturers like Kleenex, Huggies and Cottonelle. This dividend dynamo has been a dependable wealth compounder for generations, so I made a decision to place it by means of my Worth Meter.
To start with, let’s look at Kimberly-Clark’s valuation.
The corporate at the moment trades at an enterprise value-to-net asset worth (EV/NAV) ratio of 48.7. At first look, which will appear astronomically excessive in contrast with the typical EV/NAV of 6.8 amongst related corporations.
Nevertheless, once we take into account Kimberly-Clark’s extraordinary money era capabilities, its valuation turns into extra justifiable.
Final 12 months alone, the corporate grew its free money circulate by nearly 50% – from underneath $1.9 billion to almost $2.8 billion.
Much more impressively, over the previous 4 quarters, the corporate’s free money circulate averaged an astonishing 745.9% of its internet asset worth. To place this in perspective, the typical for corporations with an analogous money circulate historical past is a mere 8.6%.
In different phrases, Kimberly-Clark has generated money relative to its internet belongings at a charge practically 100 occasions that of its friends.
Put merely, it’s in a league of its personal.
This strong money circulate is the driving pressure behind Kimberly-Clark’s outstanding dividend monitor document. The corporate is a proud member of the “Dividend Aristocrats” membership, an elite group of S&P 500 corporations which have raised their payouts for no less than 25 consecutive years.
However Kimberly-Clark has far surpassed that threshold. It has a formidable streak of 53 years of uninterrupted dividend hikes. The inventory at the moment boasts a ahead dividend yield of three.5% and a manageable payout ratio of 65.8% of ahead earnings, so it has ample room to proceed its dividend progress.
And the corporate’s newest quarterly outcomes solely strengthen the bullish thesis.
In Q1 2024, Kimberly-Clark reported internet gross sales of $5.1 billion and natural gross sales progress of 6%, which was pushed by a mixture of worth will increase and quantity features. Moreover, gross margins expanded 12 months over 12 months to 37.1% because of robust working leverage, productiveness enhancements and decrease enter prices.
Diluted earnings per share (EPS) additionally jumped 14% 12 months over 12 months to $1.91, crushing analyst estimates.
Wanting forward, administration has raised its full-year outlook, now projecting mid-single-digit progress in natural gross sales and low double-digit progress in EPS for 2024. And its “Optimize Margin Construction” initiative, which goals to digitalize the availability chain and enhance effectivity, is anticipated to generate greater than $3 billion in gross productiveness and $500 million in working capital financial savings.
If profitable, these efforts ought to assist mitigate any short-term headwinds.
The corporate’s newest outcomes and its optimistic forecast showcase its potential to climate difficult market circumstances whereas being proactive and staying forward of the curve.
It’s additionally value noting that the corporate is growing shareholder worth by means of model acquisitions and share buybacks.
Whereas Kimberly-Clark will not be a high-flying progress inventory, it gives traders a uncommon mixture of stability, earnings and long-term progress potential in an more and more unsure market. For affected person traders searching for a dependable addition to their portfolios, it’s a inventory value contemplating.
The Worth Meter charges Kimberly-Clark as being “Barely Undervalued.”
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