Are These Four Dividend Aristocrat Stocks Losing Their Sheen?



Financial performance

The stock prices of consumer product giants Kimberly-Clark (KMB), Procter & Gamble (PG), Clorox (CLX), and Colgate-Palmolive (CL) offer high dividend yields. These companies have consistently increased their dividends for more than 25 years, earning the status of dividend aristocrats.

Another key factor contributing to these rising dividend yields is the double-digit decline in their stock prices on a YTD (year-to-date) basis on June 22. The increasing dividend yield and the pullback in their stock prices make them an attractive bet. 

However, higher competition and rising costs have taken a toll on their financial performance, keeping investors at bay. Also, the aggressive push by retailers for private label products remains a drag on their growth.

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Amid these challenges, consumer product manufacturers are investing in brands and focusing on innovation-led products to accelerate sales growth. These companies are expected to take pricing action, generating higher productivity and cost savings to offset the inflation in input and logistics costs. However, investors could wait for a quarter or two to see a clear recovery trend before becoming constructive on these stocks.

Based on their June 22 closing prices, Kimberly-Clark, Procter & Gamble, Clorox, and Colgate-Palmolive offered dividend yields of 4.0%, 3.7%, 3.0%, and 2.7%, respectively.

Valuations remain low

The stock prices of these companies are trading well below their historical multiples. For instance, Procter & Gamble, Kimberly-Clark, Clorox, and Colgate-Palmolive were trading at forward PE multiples of 17.9x, 14.7x, 21.5x, and 20.2x, respectively, on June 22. Their four-year historical averages were 20.5x, 19.0x, 23.3x, and 23.2x, respectively.


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