The Motley Fool: Kimberly-Clark is growing

The Fool’s Take
Kimberly-Clark is acquiring Kenvue, creating a health and wellness giant with $32 billion in revenue and 10 brands generating over $1 billion in annual sales each (such as Kimberly-Clark’s Kleenex and Huggies and Kenvue’s Tylenol and Listerine).
Kimberly-Clark is expecting a net benefit of $2.1 billion within four years of closing the deal. The larger scale will also help the combined company navigate the issues Kenvue has faced since becoming independent in 2023, following its separation from Johnson & Johnson.
The combined company should be in a strong financial position to continue paying a growing dividend. While Kimberly-Clark is taking on debt to fund the deal, it aims to reduce its debt level quickly. Kimberly-Clark’s dividend yield was recently a hefty 4.7%.
The deal isn’t without risk, though. While the combined company will be in a better position to weather potential legal issues, they could still be costly. This could weigh on its stock and potentially impact its ability to grow the dividend in the future.
Kimberly-Clark’s recent share price is attractive, though, with a recent forward-looking price-to-earnings (P/E) ratio of 14.1, well below its five-year average of 18.9.
(The Motley Fool owns shares of and recommends Kenvue.)
Ask The Fool
From N.T., Jacksonville, N.C.: What is “earnings season”?
It’s when many companies’ earnings reports are released. Public companies (those with publicly traded stock) must issue three quarterly “10-Q” reports and an annual “10-K” report (for their fourth quarter), detailing their earnings and financial condition.
Many companies conclude their years at the end of December, while others choose March, June or September. Earnings reports are typically issued a few weeks after the end of each quarter, so there are four “earnings seasons” throughout the year: generally, from mid-January through February, from mid-April through May, from mid-July through August and from mid-October through November.
Earnings seasons are noteworthy because if results are better than predicted or expected, a company’s stock price can jump — and, conversely, it can sink on worse-than-expected results.
Reports also offer investors the latest information on revenue, earnings, growth trends and more, and they can result in analysts revising their opinions on companies.
It’s a good idea to learn to read and understand financial statements yourself — and to keep up with your holdings’ earnings reports.
From M.P., Kenosha, Wisc.: Do you generally have to work for a company in order to buy its stock?
Generally not, though employees of some companies sometimes do get to buy shares at a discount. You can buy shares of thousands of publicly traded companies — from Adobe and Apple to Zebra Technologies and Zoetis — once you open a brokerage account. (Read about some good brokerages here: Fool.com/money/buying-stocks.)
Before investing in stocks, read up on the topic. Or you could just start with a low-fee, broad-market index fund such as one that tracks the S&P 500.
The Fool’s School
In Philip A. Fisher’s 1958 book, Common Stocks and Uncommon Profits (Wiley, $28), he laid out “the 15 points to look for in a common stock.” The list can still help us evaluate stock candidates for our portfolios. Here are some of the questions he posed:
–Does the company have products or services with sufficient market potential to make possible a sizable increase in sales for at least several years?” Ideally, a company will have a large target market, offering a lot of room to grow.
–Does the management have a determination to continue to develop products or processes that will still further increase total sales potentials when the growth potentials of currently attractive product lines have largely been exploited?” The best companies have shown they can innovate and keep introducing new offerings for customers. Significant investments in research and development are a promising sign.
–Does the company have a worthwhile profit margin?” and “What is the company doing to maintain or improve profit margins?” Favor companies with profit margins greater than those of their peers. And increasing margins are desirable, too.
–Does the company have outstanding labor and personnel relations?” Companies that treat their workers well have lower turnover rates, which can save money. And a satisfied employee may treat customers better, too.
–Are there other aspects of the business, somewhat peculiar to the industry involved, which will give the investor important clues as to how outstanding the company may be in relation to its competition?” Here he’s seeking sustainable competitive advantages, such as a valuable brand (for example, Apple and Nike), cost leadership (McDonald’s and Walmart), and economies of scale (Amazon and Netflix).
–Does the management talk freely to investors about its affairs when things are going well but ‘clam up’ when troubles and disappointments occur?” You can get a feel for this by reading through several years’ worth of letters to shareholders in a company’s annual reports. If you get the sense that management is talking straight with shareholders, that’s a green flag.
My Dumbest Investment
From L.K., via email: In 1982, I had $2,000 to invest. My broker suggested investing in Nike, but John McEnroe represented Nike, and I couldn’t stand him. So I went with a new company whose chicken was delicious. Unfortunately, not enough diners agreed, and the company soon went under. Nike, on the other hand, seems to have done rather well.
The Fool responds: Yes, Nike has indeed done rather well, averaging annual gains of 10.8% just over the past 30 years, versus 8.9% for the S&P 500 over the same period. (With dividends reinvested in more shares along the way, those numbers would be 11.4% vs. 10.2%.)
Nike went public in 1980, so you’d have gotten in near the ground floor in 1982 and would have profited even more. But only hindsight is 20/20 when it comes to stocks. No one could have known back then that Nike would be worth more than $95 billion late in 2025.
Had you removed emotions from your decision-making, you might have done quite well, but it’s also fair to avoid companies where you have moral or ethical objections, because there are many other wonderful companies that can make you richer over many years.
(Do you have a smart or regrettable investment move to share with us? Email it to TMFShare@fool.com.)
Who Am I?
I trace my roots to 1833, when a London antique dealer started selling decorative seashells. His sons inherited me and became pioneers in bulk oil shipping.
In 1907, I merged with a rival and expanded my operations. My tankers were used by the Allies in World War I, and my refineries in the U.S. helped the Allied forces in WWII.
Today, with a recent market value near $210 billion, I’m an energy giant. I recently employed around 96,000 people and boasted 1 million business customers. I paid out $8.7 billion in dividends to shareholders in 2024.
Who am I?
Forget last week’s question? Find it here.