Kimberly-Clark's (NYSE:KMB) Shareholders Will Receive A Bigger Dividend Than Last Year

Kimberly-Clark Corporation's (NYSE:KMB) dividend will be increasing from last year's payment of the same period to $1.18 on 4th of April. This takes the dividend yield to 3.6%, which shareholders will be pleased with.

View our latest analysis for Kimberly-Clark

Kimberly-Clark's Earnings Easily Cover The Distributions

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Before making this announcement, Kimberly-Clark's was paying out quite a large proportion of earnings and 86% of free cash flows. This indicates that the company is more focused on returning cash to shareholders than growing the business, but we don't think that there are necessarily signs that the dividend might be unsustainable.

Looking forward, earnings per share is forecast to rise by 26.4% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 67%, which would make us comfortable with the sustainability of the dividend, despite the levels currently being quite high.

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 $2.96 in 2013 to the most recent total annual payment of $4.72. This implies that the company grew its distributions at a yearly rate of about 4.8% over that duration. Slow and steady dividend growth might not sound that exciting, but dividends have been stable for ten years, which we think makes this a fairly attractive offer.

Dividend Growth May Be Hard To Achieve

The company's investors will be pleased to have been receiving dividend income for some time. However, initial appearances might be deceiving. Kimberly-Clark has seen earnings per share falling at 2.3% per year over the last five years. A modest decline in earnings isn't great, and it makes it quite unlikely that the dividend will grow in the future unless that trend can be reversed. Earnings are forecast to grow over the next 12 months and if that happens we could still be a little bit cautious until it becomes a pattern.

Our Thoughts On Kimberly-Clark's Dividend

Overall, we always like to see the dividend being raised, but we don't think Kimberly-Clark will make a great income stock. Although they have been consistent in the past, we think the payments are a little high to be sustained. Overall, we don't think this company has the makings of a good income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 1 warning sign for Kimberly-Clark that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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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.