Kimberly-Clark Corporation (NYSE: KMB) to pay dividend of US $ 1.14 in four days
Readers wishing to buy Kimberly-Clark Company (NYSE: KMB) for its dividend will have to act shortly, as the stock is about to trade ex-dividend. The ex-dividend date occurs one day before the record date, which is the day on which shareholders must be on the books of the company to receive a dividend. The ex-dividend date is important because the settlement process involves two full business days. So if you miss this date, you would not appear on the books of the company on the date of registration. In other words, investors can buy Kimberly-Clark shares before December 9 in order to be eligible for the dividend, which will be paid on January 4.
The company’s next dividend payment will be US $ 1.14 per share, and over the past 12 months the company has paid a total of US $ 4.56 per share. Calculating the value of last year’s payouts shows Kimberly-Clark has a sliding 3.4% return on the current price of $ 135.39. Dividends are an important source of income for many shareholders, but the health of the business is critical to sustaining these dividends. So we need to determine whether Kimberly-Clark can afford its dividend and whether the dividend could increase.
See our latest analysis for Kimberly-Clark
If a company pays more dividends than it has earned, then the dividend could become unsustainable – which is not an ideal situation. Its dividend payout ratio is 76% of profits, which means the company pays out the majority of its profits. The relatively limited reinvestment of earnings could slow the rate of future earnings growth. We would be concerned about the risk of falling earnings. A useful secondary check can be to assess whether Kimberly-Clark has generated enough free cash flow to pay its dividend. The company paid out 100% of its free cash flow over the past year, which we believe is outside the ideal range for most businesses. Businesses generally need more cash than income – the expenses don’t pay for themselves – so it’s not great to see them shell out so much of their cash flow.
While Kimberly-Clark’s dividends were covered by the company’s reported earnings, the cash flow is a bit more important, so it’s not great to see that the company hasn’t generated enough cash to pay its dividends. . If this happened multiple times, it would pose a risk to Kimberly-Clark’s ability to maintain its dividend.
Click here to view the company’s payout ratio, as well as analysts’ estimates of its future dividends.
Have profits and dividends increased?
Companies with strong growth prospects generally make the best dividend payers because dividends are easier to grow when earnings per share improve. Investors love dividends, so if earnings go down and the dividend is reduced, expect a stock to be sold massively at the same time. For this reason, we are pleased to see that Kimberly-Clark’s earnings per share have grown 16% per year over the past five years. Profits have grown at a decent pace, but we’re concerned that dividend payments have consumed most of the company’s cash flow over the past year.
Another key way to measure a company’s dividend outlook is to measure its historical rate of dividend growth. Over the past 10 years, Kimberly-Clark has increased its dividend to around 5.0% per year on average. It’s good to see that both earnings and dividend have improved – although the former has grown much faster than the latter, perhaps because the company has reinvested more of its earnings into growth.
Should investors buy Kimberly-Clark for the next dividend? The best dividend-paying stocks generally have a long history of growing earnings per share (EPS) through a combination of earnings growth and buybacks. So, you might think Kimberly-Clark buying back shares, increasing her EPS, and keeping profits in her business is a good combination. However, we note with some concern that it paid off 100% of its free cash flow last year, which is uncomfortably high and makes us wonder why the company chose to spend even more money on it. redemptions. Overall, it’s not a bad combination, but we think there is probably a more attractive dividend outlook.
While you’re not overly concerned with Kimberly-Clark’s ability to pay dividends, you should still be aware of some of the other risks this business faces. For example, we found 1 warning sign for Kimberly-Clark which we recommend that you consider before investing in the business.
A common investment mistake is to buy the first interesting stock you see. Here you will find a list of promising dividend paying stocks with a yield above 2% and an upcoming dividend.
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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts using only 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 into account your goals or your financial situation. Our aim is to bring you long-term, targeted analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price sensitive companies or qualitative documents. Simply Wall St has no position in any of the stocks mentioned.