We recently compiled a list of the 10 Undervalued Dividend Aristocrats To Buy According to Hedge Funds. In this article, we are going to take a look at where Kimberly-Clark Corporation (NYSE:KMB) stands against the other undervalued dividend aristocrats to buy according to hedge funds.
A dividend aristocrat is an S&P 500 company that not only maintains regular dividend payments to shareholders but also increases its payouts annually. To qualify as a dividend aristocrat, a company must raise its dividends consistently for at least 25 consecutive years.
Michael Clarfeld, Portfolio Manager at ClearBridge, recently talked about why companies that consistently grow their dividends are well-positioned to handle the challenges of 2025. With rising costs, tighter margins, higher interest rates, and inflation on the horizon, Clarfeld is still optimistic about the economy. He pointed to strong employment numbers, upbeat consumer sentiment, and confident businesses, especially after the election. Pro-business policies under the Trump administration could drive investments and growth, which sounds great, but there’s a catch. For instance, bringing manufacturing back to the US would create jobs and boost wages, but it could also increase business costs. After two strong years, Clarfeld doesn’t see much room for big capital gains in 2025. Plus, with inflation sticking around, the Federal Reserve is likely to take a more cautious approach. That said, he sees opportunities in sectors like European and global consumer staples and US energy infrastructure.
Clarfeld is a big fan of dividend growth stocks, calling them a timeless investment. They can act as a safety net during volatile markets and provide steady income, which is especially useful when capital appreciation feels out of reach. He also highlighted how dividends help protect your purchasing power by keeping up with inflation. In his view, dividend growth is a smart and reliable strategy for navigating a potentially bumpy 2025.
Paul Baiocchi of SS&C ALPS Advisors sees dividend investing as a smart move, expecting the Fed to ease rates. According to Baiocchi, investors are shifting from money markets and fixed income to dividend-paying stocks, especially companies with leverage that could benefit from lower interest rates. Similarly, Mike Akins of ETF Action also sees dividend ETFs as a defensive play, highlighting that the companies included typically have strong balance sheets. He notes the growing popularity of dividend-focused ETFs, suggesting that consistent dividends give investors confidence in a company’s stability and financial health. Both experts agree that dividends offer a sense of durability and drawdown protection in uncertain markets.
A stack of disposable diapers in the foreground with a mother and her baby in the background.
In this article, we selected stocks from the Dividend Aristocrats List that had a P/E ratio below 20 as of December 23. Our focus was on identifying stocks with the strongest hedge fund sentiment in Q3 2024 among the 66 Dividend Aristocrats that also met our P/E criteria. The stocks are ranked below in ascending order based on the number of hedge fund holders for each company.
At Insider Monkey, we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
Dividend Yield as of December 23: 3.72%
Number of Hedge Fund Holders: 45
P/E Ratio: 17.01
Kimberly-Clark Corporation (NYSE:KMB), founded in 1872 and headquartered in Dallas, Texas, manufactures and markets personal care and consumer tissue products. The company operates through three segments – Personal Care, Consumer Tissue, and K-C Professional. Consumer demand for premium products continues to grow across developed and emerging markets, supported by trends like aging populations driving adult care. This positions KMB as one of the best dividend aristocrat stocks to buy.
Kimberly-Clark Corporation (NYSE:KMB)’s gross margins have consistently improved over the past eight quarters, averaging 37% for the year. The company remains confident in achieving its long-term goal of at least 40% gross margin and operating margins between 18-20% by the end of the decade. Kimberly-Clark Corporation (NYSE:KMB) reported third-quarter sales of $5.0 billion, which was 4% lower than the same period last year. This drop was mainly due to a 3% hit from unfavorable currency exchange rates and a 1% impact from selling off their PPE business in July.
Looking ahead, Kimberly-Clark Corporation (NYSE:KMB) anticipates stronger Q4 performance, with stepped-up investments in advertising and brand support. The company expects top-line growth to improve, driven by a volume mix-led strategy while navigating one-time and external factors. Despite these challenges, Kimberly-Clark is making steady progress on margins and remains committed to long-term growth.
So far this year, Kimberly-Clark Corporation (NYSE:KMB) generated $2.4 billion in cash from operations, up from $2.3 billion last year, mainly due to improved operating performance. The company returned $2.0 billion to shareholders through dividends and stock buybacks. Total debt was reduced to $7.5 billion as of September 30, 2024, from $8.0 billion at the end of 2023. Kimberly-Clark Corporation (NYSE:KMB)’s board of directors announced a quarterly dividend of $1.22 per share, payable on January 3, 2025, to shareholders on record as of December 6, 2024. This marks the company’s 90th consecutive year of paying dividends and the 52nd straight year of increasing them.
Insider Monkey’s Q3 data shows that 45 hedge funds were bullish on Kimberly-Clark Corporation (NYSE:KMB), compared to 43 funds in the prior quarter. D E Shaw is the leading stakeholder of the company, with 1.28 million shares worth $182.35 million.
Overall, KMB ranks 4th on our list of the undervalued dividend aristocrats to buy according to hedge funds. While we acknowledge the potential of KMB to grow, our conviction lies in the belief that certain AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than KMB but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
