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Kimberly-Clark Corporation (NYSE:KMB), together with its subsidiaries, manufactures and markets personal care, consumer tissue, and health care products worldwide. The company operates in four segments: Personal Care, Consumer Tissue, K-C Professional, and Health Care. This dividend champion has paid dividends since 1935 and has increased them for 41 years in a row.

The company's last dividend increase was in February 2013 when the Board of Directors approved a 9.50% increase in the quarterly annual dividend to 81 cents /share. The company's peer group includes Procter & Gamble (NYSE:PG), Colgate-Palmolive (NYSE:CL), and Clorox (NYSE:CLX).

Over the past decade this dividend growth stock has delivered an annualized total return of 11.20% to its shareholders.

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The company has managed to deliver a 3.20% average increase in annual EPS over the past decade. Kimberly-Clark is expected to earn $5.72 per share in 2013 and $6.10 per share in 2014. In comparison, the company earned $4.42/share in 2012.

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The company has maintained a very consistent stock buyback program in the past. Between 2003 and 2013, the number of shares decreased from 509 million to 386 million.

Kimberly-Clark has focused on increasing market share through product innovation and increased marketing. The company has worked closely in streamlining operations in the sluggish North American market, eliminating positions and closing several facilities under its FORCE plan. Kimberly-Clark plans on realizing $400 - 500 million in annual cost savings through 2013 with its FORCE plan to streamline operations and focus on best practices.

Commodity prices could be detrimental to total costs at the company, as is the competitive nature of developed markets in which Kimberly-Clark does business. As with other consumer products companies, the growth is likely to come from developing and emerging markets, rather than developed markets. Developed markets could benefit from cost cutting and efficiency profits, which would decrease the total price of doing business. Under the company's global business plan, announced in 2003, it is looking for annual sales growth in the 3%-5% range, EPS growth in the mid to high single digits and dividend increases in line with earnings growth. For more on the global business plan, check this document.

The company recently announced its intention to spin-off its healthcare business. Existing Kimberly-Clark shareholders will receive shares in the K-C Healthcare unit through a tax-free distribution. The K-C healthcare unit had $1.6 billion in annual sales in 2012, and $229 million in operating income. It accounted for approximately 8.50% of Kimberly-Clark's operating income in 2013. If approved by the board, this transaction could close by the third quarter of 2014.

Kimberly-Clark has maintained a high level of returns on equity over the past decade. The indicator never fell below 25% during our study period. I generally want to see at least a stable return on equity over time. I use this indicator to assess whether management is able to put extra capital to work at sufficient returns.

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The annual dividend payment has increased by 9.50% per year over the past decade, which is higher than the growth in EPS. This has been achieved mostly due to the expansion of the dividend payout ratio.

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A 9% growth in distributions translates into the dividend payment doubling every eight years on average. Future dividend growth would have to track growth in earnings per share, and would likely be in the mid-single digits.

The dividend payout ratio has increased from 41% in 2003 to almost 67% in 2012. Looking at estimated earnings for 2013 however, the forward dividend payout ratio is 57%. A lower payout is always a plus, since it leaves room for consistent dividend growth minimizing the impact of short-term fluctuations in earnings.

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Currently Kimberly-Clark is attractively valued at 18.40 times estimated 2013 earnings, yields 3% and has a sustainable distribution. However, if you manage to find a company with low P/E, and/or higher expected growth, you might want to purchase the shares of the other company. This assumes comparable yields, and dividend sustainability. I almost bought some Kimberly-Clark for my Roth IRA in early October at 16 times forward earnings, but unfortunately the shares took off before I had the cash to invest. While the company's business is pretty consistent, I would look for lower entry valuations before adding to my position there.

Source: Should You Buy This High Yield Dividend Growth Stock Today?