In a market that usually seems like a on line casino, it’s refreshing to search out shares that constantly ship spectacular outcomes yr after yr.
One such firm is Kimberly-Clark (NYSE: KMB), the buyer staples large 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 study Kimberly-Clark’s valuation.
The corporate presently 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 common EV/NAV of 6.8 amongst comparable corporations.
Nevertheless, after we take into account Kimberly-Clark’s extraordinary money era capabilities, its valuation turns into extra justifiable.
Final yr alone, the corporate grew its free money circulation by nearly 50% – from below $1.9 billion to just about $2.8 billion.
Much more impressively, over the previous 4 quarters, the corporate’s free money circulation averaged an astonishing 745.9% of its web asset worth. To place this in perspective, the common for corporations with an identical money circulation historical past is a mere 8.6%.
In different phrases, Kimberly-Clark has generated money relative to its web belongings at a price almost 100 occasions that of its friends.
Put merely, it’s in a league of its personal.
This sturdy money circulation is the driving drive behind Kimberly-Clark’s outstanding dividend monitor file. 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 a minimum of 25 consecutive years.
However Kimberly-Clark has far surpassed that threshold. It has a powerful streak of 53 years of uninterrupted dividend hikes. The inventory presently 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 web gross sales of $5.1 billion and natural gross sales progress of 6%, which was pushed by a mix of worth will increase and quantity features. Moreover, gross margins expanded yr over yr to 37.1% due to robust working leverage, productiveness enhancements and decrease enter prices.
Diluted earnings per share (EPS) additionally jumped 14% yr over yr to $1.91, crushing analyst estimates.
Trying 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 increase 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 situations whereas being proactive and staying forward of the curve.
It’s additionally value noting that the corporate is rising shareholder worth by means of model acquisitions and share buybacks.
Whereas Kimberly-Clark might not be a high-flying progress inventory, it presents buyers a uncommon mixture of stability, earnings and long-term progress potential in an more and more unsure market. For affected person buyers looking 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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