-
Historically, Kimberly-Clark has focused on producing paper products such as towels and diapers.
-
This business enables the company to provide investors with steadily growing dividends.
-
The pending acquisition of Kenvue will significantly change Kimberly Clark’s product portfolio.
-
10 stocks we like better than Kimberly-Clark ›
Kimberly Clark (Nasdaq: KMB) is a dividend king, with annual payout increases for more than five decades supporting the stock’s attractive 5% yield. However, income investors interested in this consumer staples giant need to consider more than just the company’s current strong performance. This is because upcoming acquisitions could have a significant impact on its future. Let’s take a closer look.
Kimberly-Clark specializes in products that use wood pulp in some way. Its product portfolio includes toilet paper, paper towels, feminine hygiene products, diapers and adult incontinence products. You may know, if not use, some of the company’s major brands, such as Scott, Kleenex, Huggies, Kotex and Depends.
The company is a leader in the consumer staples industry with operations around the world. It can go head-to-head with any competitor in terms of production, distribution, marketing and innovation capabilities. 53 consecutive years of annual dividend increases are clear evidence of the company’s ability to hold its own in a highly competitive industry.
However, Kimberly-Clark isn’t the fastest-growing business. Its shares typically trade at a discount to their faster-growing peers, e.g. Procter & Gamble. For example, today, Procter & Gamble has a dividend yield of 3%, while Kimberly-Clark has a dividend yield of nearly 5%, and its P/E ratio is 17 times compared to P&G’s P/E ratio of nearly 21 times.
To add insult to injury, Kimberly-Clark also faces significant challenges in key product categories, including declining birth rates in the diaper market. It also lacks some of the diversification of Procter & Gamble, which has interests in categories such as soap, deodorant and toothpaste.
Management and the board have been looking for ways to boost growth for years. Opportunities may come in the form of: kenviere (NYSE:KVUE).
Kenvue is the consumer products division spun out of: Johnson & Johnson. This allows the latter to focus on the higher-growth medical device and pharmaceutical sectors.
Kenvue owns some iconic brands including Band-Aid, Listerine, and Tylenol, among others. Unfortunately, the newly independent company got off to a rocky start, with weak revenue and earnings trends. The stock price has also been weak, leading Kimberly-Clark to acquire Kenvue.
This is a significant acquisition in many ways. The price tag is $48.7 billion. Taking on additional debt through a large acquisition is a bit risky, given that the company’s debt-to-equity ratio is 5.4 compared to P&G’s 0.7. Kimberly-Clark’s interest expense coverage ratio is more than 10 times, while P&G’s interest expense coverage ratio is 22 times. Investors will want to pay extra close attention to Kimberly-Clark’s leverage.
But at the same time, acquiring Kenvue will significantly change the company’s business. Previously, it competed directly with Procter & Gamble in paper products. Now it will also compete in consumer products. The move will significantly raise the company’s standards, taking it from sixth to second in the industry, directly behind Procter & Gamble.
If it can get Kenvue’s growth back on track, the acquisition could provide dividend investors with an attractive yield and faster growth. Essentially, this dividend king could give you a lifetime of reliable income and strong capital gains if investors give it a valuation more in line with Procter & Gamble.
The opportunity presented by Kimberly-Clark’s pending acquisition of Kenvue is attractive. However, given the company’s high leverage and the risk that the integration process might not go smoothly, it may be best suited for more aggressive investors. Execution will be the most important factor, and it may be several years before we know whether the acquisition is a success or a failure.
Before buying Kimberly-Clark stock, consider the following factors:
this Motley Fool Stock Advisor The analytics team has just identified what they believe is 10 Best Stocks Investors can buy now…and Kimberly-Clark isn’t one of them. The 10 stocks selected could generate huge returns in the coming years.
consider when Netflix This list was created on December 17, 2004… If you invested $1,000 when we recommended, You will have $488,653!* or when NVIDIA This list was created on April 15, 2005… If you invested $1,000 when we recommended, You will have $1,148,034!*
Now, it’s worth noting stock advisor The overall average return is 971% — outperformed the market compared to the S&P 500’s 196%. Don’t miss the latest top 10 list, available via stock advisorand join an investment community built by individual investors for individual investors.
See 10 stocks »
*Stock Advisor returned on January 7, 2026.
Reuben Gregg Brewer is with Procter & Gamble. The Motley Fool has an interest in and recommends Kenvue. The Motley Fool recommends Johnson & Johnson. The Motley Fool has a disclosure policy.
Could buying Kimberly-Clark stock today benefit your life? Originally posted by The Motley Fool