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Kimberly-Clark (NYSE:KMB), 138 years old, has paid dividends since 1935 and increased the dividend for 38 consecutive years. The business of KMB is divided into 4 categories:

  1. Personal Care products are best known for Huggies disposable diapers and Kotex feminine care products.
  2. The Consumer Tissue segment sells facial and bathroom tissue towels, paper towels, napkins for household use under names such as Kleenex, Scott, Cottonelle and Viva.
  3. The K-C Professional & Other segment sells the above personal care products for the away from-home marketplace including popular brands names such as Kimberly-Clark, Kleenex, KleenGuard and Scott.
  4. The Health Care segment sells disposable health products such as surgical drapes and gowns, infection control products, face masks, exam gloves and other disposable medical products under brand names of Kimberly-Clark, Ballard among others.

While the product lines may appear to be mundane, KMB has a long track record of earnings growth even if it has been punctuated with ups and downs along the way. They are a global company and expect a large portion of future growth to come from business outside the US and look for very rapid growth in BRICIT (Brazil, Russia, India, China, Indonesia and Turkey) countries to outpace growth in established markets.

These countries with large populations are just being introduced to KMB products. US and Canada sales have already been diluted down to 55% of total sales as KMB products are sold in more than 150 countries.

2009 sales were broken down (billions of dollars):

  • Personal Care...................8.4
  • Consumer Tissue............6.4
  • K-C Professional & Other..3.0
  • Health Care.......................1.4
  • Consolidated.....................19.1

2009 sales by area (billions of dollars):

  • US...................................10.1
  • Canada.........................0.6
  • Europe..........................3.2
  • Asia, Latin America & other....6.1

(Numbers don't add to total sales because of intergeographic sales.)

Following an excellent record of growth, KMB stock has been in a choppy trading range, between 50-70, over the last decade. EPS grew from $3.31 in 2000 to $4.52 last year. The forecast for 2009 is $4.89 and $5.28 for 2010 implying a P/E of about 12X. Earnings growth is coming from sales growth and cost savings. While earnings have been bumpy, the overall growth trend allowed KMB to raise yearly dividends to maintain its status as a Dividend Aristocrat.

The company is easy to dismiss because of its proletariat paper products. But expansion in emerging and developing countries with very large populations should support many years of earnings growth which is needed to continue the streak of yearly dividend increases. The dividend was just raised 10% to $2.64 providing a yield of 4.2% based on a stock price of $63. Growth prospects are excellent and the dividend provides a yield higher than many other industrial companies. KMB deserves more attention.

Disclosure: No positions

Source: Kimberly-Clark: More Than Just a Tissue Company