Revisiting 3 Dividend Aristocrats Consumed With Consumer Consumables

With two-thirds of the current quarter behind us and the August Manufacturing PMI reading from IHS Markit pointing to the strongest expansion in factory activity since January 2019, let's take a fresh look at three Dividend Aristocrats that are focused on personal care and/or paper products. I'm choosing to focus on this area given the consumable nature of the products, which tends to make them rather inelastic. Moreover, despite the easing of Covid-19 restrictions and the increase in manufacturing activity, my local Kroger appears to be capitalizing on the pandemic when it comes to its pricing of paper towels and other paper products. They may be striking while the iron is hot, but I would suspect more than a few in the grocery line are feeling the pinch of those higher prices. And yes, I am one of them. When did two rolls of Bounty go for $7.49 or four rolls for $12.99? I digress... When we think of these kinds of products and the Dividend Aristocrats, the companies that quickly come to one's frontal lobe are Kimberly-Clark , Procter & Gamble and Colgate-Palmolive . We know each of these is a quality company by the sheer fact that they've not only made the S&P 500 but also have increased their dividends on a consecutive basis to make it into the Aristocrats. Let's take them in order of lowest to highest dividend yield, starting with Colgate-Palmolive, which is a holding of Jim Cramer's Action Alerts PLUS charitable trust. Colgate-Palmolive The company best known for its namesake toothpaste recently paid its second quarterly dividend at the rate of $0.44 per share. On an annualized basis that payout offers a yield of 2.25%, which is nicely above the yield associated with the S&P 500 but isn't as compelling as a number of others out there. And among these three Aristocrats it's the lowest yield of the bunch. Still, we must appreciate the nature of the company's business, which spans oral care, personal care and home care as well as pet care, particularly because all four lines are without a doubt inelastic in nature. In each of the last few years Colgate-Palmolive has bumped up its quarterly dividend by $0.01 per share, which if continued would mean the company will be paying $0.45 per share this time next year, representing only a modest increase in the yield to around 2.3%. That assumes the current share price holds. A better spot to pick up CL shares would be closer to $70, which would offer a yield of 2.5% to 2.6%. Procter & Gamble Much like Colgate-Palmolive, Procter & Gamble increased its dividend early on during the pandemic and has just finished paying its second quarterly dividend at the $0.7907 level. The difference between the two is P&G's latest dividend increase wasn't a penny per share but rather $0.05 per share. That incremental $0.20 per share in annual dividends gave investors a reason to cheer PG shares, which have climbed 15% since P&G announced that new dividend on April 14. Despite the size of the increase, which speaks to P&G's ability to realize pricing power across its beauty, grooming, healthcare, baby and feminine care products, its shares still offer a yield near 2.3% even after the recent run-up in share price. Like CL shares, PG shares are perched on top of their Wall Street consensus price target, which could give dividend investors a potential opportunity if the shares were to trade off. While the odds of PG shares revisiting their mid-April level near $120 are rather low, a pullback to the $127 level offers a 2.5% yield. And for those wondering, the Bounty paper towels that I mentioned above are a Procter & Gamble product. Kimberly-Clark Now let's turn to paper products company Kimberly-Clark, which counts Cottonelle, Viva, Kleenex and Scott among its pantheon of branded paper products, as are Huggies and Kotex. The record date for the company's third quarterly dividend payment of $1.07 per share is Sept. 3, which means that a few weeks after we enter 2021 we are likely to hear about the company's 2021 dividend to shareholders. In recent years, Kimberly-Clark has been boosting its quarterly dividend each year by $0.03 to $0.04 per share. With its dividend payout ratio just under 56% and earnings expected to grow 2.5% to $7.87 a share in 2021, odds are KMB can continue on that path in 2021. At the current share price that would mean an increase in KMB's yield to roughly 2.9% from the current 2.8%. Yeah, I may be feeling the paper product pinch, but buying some KMB shares could be one way to feel more than a little better about it.

Revisiting 3 Dividend Aristocrats Consumed With Consumer Consumables

We focus on Colgate-Palmolive, Procter & Gamble and Kimberly-Clark to assess their payout prospects.

Columnist Conversation

AAP Podcast on the Fed Decision!

Fed Hikes Rates 25 Basis Points

This Weekend on Real Money

COLUMNIST TWEETS

Please Join or Log In to manage and receive alerts.