Kimberly-Clark

The hygiene products manufacturer

Does your nose run a lot in the cold season too? Here in Germany, the Tempo tissue has become the standard. Even if it's a different brand of paper tissue, people say: "Could you pass me a Tempo, please?". But what Tempo is for us, Kleenex is for Americans and many other countries around the world. In 1924, the hygiene products manufacturer Kimberly-Clark first brought Kleenex to market. Tempo, by the way, wasn't developed until 5 years later.

Today the giant Kimberly-Clark makes all kinds of products for every possible hygiene application and is very well represented in over 175 countries around the world. The investor website proudly states that a quarter of humanity uses its products every day. Assuming a growing world population, an investment here should definitely pay off.

The origins and business model of Kimberly-Clark Corp.

The company was founded in 1872 by John Kimberly, Havilah Babcock, Charles Clark and Frank Shattuck in Wisconsin, USA. Back then, its main business was making paper. It was only more than 42 years later that its researchers developed a cellulose wadding that was used by the US Army as bandage material during World War I. 6 years after that, the first sanitary pad came onto the market under the brand name Kotex - the wadding was the basis for it. As already mentioned in the introduction, the Kleenex brand was introduced to the public in the following years, and so the first disposable tissue was sold. Since then the focus has been on hygiene products.

Today Kimberly-Clark owns over 175 different products, including 5 power brands that each generate over a billion US dollars in sales a year. Huggies diapers, Scott toilet paper, U by Kotex sanitary pads or Cottonelle wet wipes, to name just a few of the brands. Kimberly-Clark also earns 16% of its revenue in the B2B (business-to-business) segment. Here the company supplies industry, schools, restaurants or public restrooms with paper towels.

What does the future look like for Kimberly-Clark?

The consumer goods manufacturer Kimberly-Clark will continue to look for innovation in the future. It will provide newer and improved products that its customers will enjoy even more. And given the growing world population, I see a great opportunity here both for the company and for its shareholders.

Why hasn't the stock done so well in recent years?

In February 2017, Kimberly-Clark hit a new all-time high. After the stock had declined for a whole 14 months, it climbed back up again. So what happened? Unfortunately, I couldn't find an exact reason for this. The fact is, though, that the consumer market is very fiercely contested. And on top of that, the company's thin profit margins and subdued revenue growth aren't helping here either. But Kimberly-Clark has held its own against the competition many times in the past.

Can the dividend continue to be paid and raised?

A share of the profits has been paid out to shareholders since 1934. Since 1972 it has been paid quarterly without interruption and raised regularly too. The Dividend Aristocrat Kimberly-Clark currently pays a dividend of 3.5%. On top of that comes the annual increase of 4-8%. Taken together, that's pretty solid and definitely impressive.

Conclusion

Kimberly-Clark has to hold its own in a competitive market, and it has been doing exactly that for almost 150 years. The company is quite broadly diversified and well equipped for the future. The nicely growing share price together with the attractive dividend is convincing. Even if the stock soon reaches an all-time high again, an investment here will surely be profitable in the long run.