- Dividend Brief
- Posts
- This Dividend King Just Dropped 15%, and the Yield Hasn't Looked This Good in Years
This Dividend King Just Dropped 15%, and the Yield Hasn't Looked This Good in Years
A 60-year Dividend King fell 15% in a single session, and the yield now sits near multi-year highs. Q2 earnings are due in two weeks. Expectations are already on the floor. Here is the setup, why the pullback is a gift, and how to play it.
Growth Watch (Sponsored)
After analyzing thousands of companies, our analysts pinpointed the 5 Stocks Set to Double based on accelerating performance, improving fundamentals, and strong technical signals.
This newly released report explains why these five could be positioned for major moves in the year ahead.
While results aren’t guaranteed, previous reports uncovered gains as high as +175%, +498%, and +673%.
Access the free report before midnight.
See the 5 Stocks Set to Double.
*This free resource is being sent by Zacks. We identify investment resources you may choose to use in making your own decisions. Use of this resource is subject to the Zacks Terms of Service.
*Past performance is no guarantee of future results. Investing involves risk. This material does not constitute investment, legal, accounting, or tax advice. Zacks Investment Research is not a licensed dealer, broker, or investment adviser.
The company is Kimberly-Clark (NYSE: KMB), the maker of Huggies, Kleenex, Cottonelle, Scott, Kotex, and Depend. The stock now trades near $110.98 after today's 15.5% drop, sitting toward the low end of a 52-week range of $92.42 to $137.46.
KMB is a Dividend King with more than 50 straight years of raises, and the pullback just reset the trailing yield back above 4.5%.
Action Item: Accumulate KMB between $105 and $115 ahead of the Q2 earnings report expected in late July. This is a fresh entry point on a name that rarely goes on sale. |
Powering Care Is Doing the Heavy Lifting
Kimberly-Clark's core business is not sexy. Paper products, personal care, and adult incontinence do not make for a great pitch deck.
But the story here is not the product line. It is the two-year cost-out program the company calls Powering Care, which is stripping fixed costs out of the manufacturing footprint and consolidating brand SKUs.
Management started this initiative when input costs were still elevated, so as pulp and resin prices have normalized, the savings drop straight to the bottom line. That is why the earnings algorithm has been outperforming even as revenue growth stays in the low single digits.
Analyst expectations for the second half already reset lower after today's pullback, which is exactly the kind of setup that tends to work. Sandbagged guidance plus a working cost program plus a Dividend King discount is a rare combination, and with the stock right at the low end of its range, the risk-reward has become much more attractive.
Short-Term Focus (Sponsored)
A newly released report highlights seven stocks chosen for their near-term potential.
Selections are based on a mix of technical and fundamental indicators.
While past picks have performed well, future results are uncertain.
The report is available for a limited time.
Access the free report
*This free resource is being sent by Zacks. We identify investment resources you may choose to use in making your own decisions. Use of this resource is subject to the Zacks Terms of Service.
*Past performance is no guarantee of future results. Investing involves risk. This material does not constitute investment, legal, accounting, or tax advice. Zacks Investment Research is not a licensed dealer, broker, or investment adviser.
Why the Fundamentals Support the Dividend Even Here
KMB throws off roughly $2.5 billion in annual free cash flow, more than enough to cover the roughly $1.7 billion in dividend payments.
That is a coverage ratio above 1.4x, comfortable by staples standards. Gross margins are trending back toward 36%, up from the 32% trough during the pulp cost spike of 2022 and 2023.
The disconnect the market is missing is on valuation. Even after today's drop, KMB trades at roughly 15x forward earnings, well below the 19x to 21x range it commanded for most of the last decade. That gap is the opportunity if the cost program keeps delivering.
Action Item: Existing holders should hold and use the pullback to average down. New investors can initiate here and add on any further weakness toward $105. |
Tech Edge (Sponsored)
First users could have already grown their money dramatically every single year this AI has been running, based on the average winning trades it uncovers – WITHOUT following market news, WITHOUT watching central banks, and WITHOUT the stress most traders deal with daily.
For a limited time, you can try this AI yourself, completely free – no email, no credit card needed.
International Tailwinds Are Underappreciated
About 50% of Kimberly-Clark's revenue comes from outside North America, and the dollar has been softening through the first half of 2026. That is a translation tailwind management has not baked into current guidance.
Emerging markets like Brazil, India, and Southeast Asia have been steady 4% to 6% volume growers for the personal care segment. The Diaper and Feminine Care categories in particular benefit from rising middle-class household formation, a structural trend that does not care about tariffs or Fed policy.
Combine currency tailwinds with steady EM volume growth, and the second-half revenue setup looks better than the sell-side is modeling. That is the kind of upside surprise that gets a stock re-rated back toward its historical multiple.
Warren Buffett has pledged to give away roughly what percentage of his Berkshire Hathaway fortune to charity? |
The Q2 Print Is the Catalyst
Consensus for Q2 sits around $114 per share on roughly $4.28 billion in revenue. Given management's habit of guiding conservatively, and given the cost savings now flowing through, the bar is low.
The key items to watch in the print: organic sales growth in the Personal Care segment, gross margin expansion, and any raise to the full-year Powering Care savings target (currently around $3 billion cumulative through 2026). A beat on any two of those three and the stock re-rates.
The Kimberly-Clark Dividend Machine
Kimberly-Clark has raised its dividend for more than 50 consecutive years, putting it in the Dividend Kings club alongside names like Procter & Gamble, Coca-Cola, and Johnson & Johnson. The current annualized dividend is roughly $5.04 per share, which puts the trailing yield above 4.5% after today's drop.
The five-year dividend growth rate has run in the low single digits, roughly 3% to 4% per year. Not flashy, but perfectly acceptable when the entry yield is above 4.5%. That is total return math that competes with the S&P 500 without needing any multiple expansion to bail it out.
Action Item: For anyone building an income sleeve, KMB right here offers a starting yield above 4.5%, a growing payout, and a proven capital return culture. |
Risks Worth Watching
The bear case on Kimberly-Clark is real and worth naming. Private label share in tissue and diapers has been creeping higher, especially at Walmart and the club channel. If consumers keep trading down, KMB's premium brands lose pricing power.
Pulp costs are the other watch item. They have normalized, but a sudden move higher would compress the very margin expansion the thesis rests on. FX can cut both ways too. If the dollar strengthens back sharply, the international tailwind reverses.
Finally, there is execution risk on Powering Care. If the savings do not materialize on management's timeline, the earnings model unravels quickly. The cost-out disclosures in the Q2 print deserve careful attention.
Putting It All Together
Kimberly-Clark just handed investors a fresh entry on a Dividend King at a yield above 4.5% with a specific catalyst two weeks out. The setup is straightforward: a working cost-cut program, sandbagged expectations, a soft dollar tailwind, and a valuation gap versus its own history.
The math does not require heroic assumptions. It just needs the Q2 print to confirm the cost program is still humming. If it does, the multiple re-rates and the growing yield keeps compounding in the meantime. That is the kind of setup a long-term income position gets built around.
That’s all for today’s edition of the Dividend Brief.
Thanks for reading, and if you have any feedback or dividend stocks you want me to take a look at, just reply to this email!
—Noah Zelvis
DividendBrief.com