Yahoo Finance Kimberly-Clark Corporation (NYSE:KMB) Is About To Go Ex-Dividend, And It Pays A 3.2% Yield
Kimberly-Clark Corporation (NYSE:KMB) is about to trade ex-dividend in the next 4 days. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order to receive a dividend. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. This means that investors who purchase Kimberly-Clark's shares on or after the 9th of September will not receive the dividend, which will be paid on the 4th of October.
The company's upcoming dividend is US$1.14 a share, following on from the last 12 months, when the company distributed a total of US$4.56 per share to shareholders. Based on the last year's worth of payments, Kimberly-Clark stock has a trailing yield of around 3.2% on the current share price of $140.75. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to check whether the dividend payments are covered, and if earnings are growing.
View our latest analysis for Kimberly-Clark
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Kimberly-Clark paid out 65% of its earnings to investors last year, a normal payout level for most businesses. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. It paid out more than half (66%) of its free cash flow in the past year, which is within an average range for most companies.
It's positive to see that Kimberly-Clark's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. For this reason, we're glad to see Kimberly-Clark's earnings per share have risen 19% per annum over the last five years. Kimberly-Clark has an average payout ratio which suggests a balance between growing earnings and rewarding shareholders. This is a reasonable combination that could hint at some further dividend increases in the future.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Kimberly-Clark has delivered 5.6% dividend growth per year on average over the past 10 years. Earnings per share have been growing much quicker than dividends, potentially because Kimberly-Clark is keeping back more of its profits to grow the business.
The Bottom Line
Is Kimberly-Clark worth buying for its dividend? Higher earnings per share generally lead to higher dividends from dividend-paying stocks over the long run. That's why we're glad to see Kimberly-Clark's earnings per share growing, although as we saw, the company is paying out more than half of its earnings and cashflow - 65% and 66% respectively. In summary, while it has some positive characteristics, we're not inclined to race out and buy Kimberly-Clark today.
In light of that, while Kimberly-Clark has an appealing dividend, it's worth knowing the risks involved with this stock. Our analysis shows 1 warning sign for Kimberly-Clark and you should be aware of it before buying any shares.
A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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