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While the state of the economy is still thoroughly unclear, what is clear is that the market is soaring. The Dow is above 15,000 and the S&P is above 1,600. One can never know when a correction may occur, or how drastic it may be, but these days I am a growing ever more cautious. In fact, when I see headlines predicting that the current bull market can last through 2015 with the Dow hitting 18,000 I am even more worried of at least a sharp short term correction taking place. The market can tend to overreact sometimes hitting highs that are too high and lows that are too low, and an atmosphere of over exuberance may be a sign of an impending correction.

Given this state of affairs, I am looking to fortify my portfolio and one solid idea that came across my radar was Kimberly Clark Corp, KMB. KMB makes mostly "paper based" products including Kleenex, Kotex, Scott and Cottonelle toilet paper, and Huggies among other things, and they sell their products to over 175 countries. In other words they produce products which have a universal, recurring, and economy independent need! They have a long and stable history (founded in 1872 and going public in 1926). Moreover, there 3.1% dividend is extremely stable, making KMB appealing to dividend investors as well.

Stock Chart

In contrast to my uneasiness with the overall market, looking at KMB's long term stock chart makes one feel extremely comfortable.

(click to enlarge)

In fact, unless you knew better just by looking at KMBs stock chart you wouldn't even know that 2009 was year of the financial crisis. It just looks like a small hiccup!

Dividend

KMBs dividend is like clockwork, its consistent and moreover consistently growing. Since 2005. (Note: I can go back much further, but for the sake of streamlining the exposition 7 years which included a fair amount of economic ups and downs seemed like a reasonable timeframe focus on). Every quarter for a year the dividend is the same, and every year the dividend payment grows. See the chart below.

Date

Dividends

Date

Dividends

3/6/13

0.81

12/3/08

0.58

12/5/12

0.74

9/3/08

0.58

9/5/12

0.74

6/4/08

0.58

6/6/12

0.74

3/5/08

0.58

3/7/12

0.74

12/5/07

0.53

12/7/11

0.7

9/5/07

0.53

9/7/11

0.7

6/6/07

0.53

6/8/11

0.7

3/7/07

0.53

3/2/11

0.7

12/6/06

0.49

12/8/10

0.66

9/6/06

0.49

9/8/10

0.66

6/7/06

0.49

6/2/10

0.66

3/8/06

0.49

3/3/10

0.66

12/7/05

0.45

12/2/09

0.6

9/7/05

0.45

9/2/09

0.6

6/8/05

0.45

6/3/09

0.6

3/2/05

0.45

3/4/09

0.6

  

The current dividend yield is a healthy 3.1%. Furthermore, the growth rate for the dividend payout also grows almost like clockwork. In fact, the annualized dividend payout growth rate is 6.7%, 7.2%, 7.4%, and 7.7%, for 1 year, 3 years, 5 years, and 7 years, respectively.

Low Volatility

KMBs is currently held by over 1,000 institutional and mutual funds, which collectively make up roughly 69% of shares outstanding. In particular, this kind of ownership leads to low volatility. For example, KMBs beta is 0.3!.

Some cautions, recent insider selling.

No analysis is complete without considering some cautions. First, very recent insider transactions have been pretty bearish. Specifically, on 5/1/13 insiders sold 65K shares, and then on the very next day 5/2/13 insiders sold another 59K shares. In total this amounts to a sale of roughly 13% of ownerships position. Nonetheless, it seems that even insider selling for KMB may historically be a bullish indicator.

Recommendation

Considering the overall strength and stability of KMB I would recommend adding KMB to a diversified portfolio as a fortification in the event of a possible correction. Moreover, for a dividend investor the 3.1% yield is a nice bonus. Nonetheless, in light of the bearish insider activity, I would keep a close eye here especially for the short term time frame.

Source: A 3% Dividend Yield And An Economy Proof Staple?