Kimberly-Clark (NYSE:KMB) Has Announced That It Will Be Increasing Its Dividend To $1.22

Kimberly-Clark Corporation's (NYSE:KMB) periodic dividend will be increasing on the 2nd of April to $1.22, with investors receiving 3.4% more than last year's $1.18. This will take the dividend yield to an attractive 3.9%, providing a nice boost to shareholder returns.

See our latest analysis for Kimberly-Clark

Kimberly-Clark's Earnings Easily Cover The Distributions

A big dividend yield for a few years doesn't mean much if it can't be sustained. The last payment made up 90% of earnings, but cash flows were much higher. In general, cash flows are more important than earnings, so we are comfortable that the dividend will be sustainable going forward, especially with so much cash left over for reinvestment.

Looking forward, earnings per share is forecast to rise by 46.0% over the next year. Assuming the dividend continues along the course it has been charting recently, our estimates show the payout ratio being 65% which brings it into quite a comfortable range.

Kimberly-Clark Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The dividend has gone from an annual total of $3.24 in 2014 to the most recent total annual payment of $4.72. This means that it has been growing its distributions at 3.8% per annum over that time. While the consistency in the dividend payments is impressive, we think the relatively slow rate of growth is less attractive.

We Could See Kimberly-Clark's Dividend Growing

Investors could be attracted to the stock based on the quality of its payment history. It's encouraging to see that Kimberly-Clark has been growing its earnings per share at 5.2% a year over the past five years. Past earnings growth has been decent, but unless this is one of those rare businesses that can grow without additional capital investment or marketing spend, we'd generally expect the higher payout ratio to limit its future growth prospects.

In Summary

Overall, we always like to see the dividend being raised, but we don't think Kimberly-Clark will make a great income stock. The company is generating plenty of cash, but we still think the dividend is a bit high for comfort. We would be a touch cautious of relying on this stock primarily for the dividend income.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 3 warning signs for Kimberly-Clark that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.