The Procter & Gamble Company (PG), Kimberly Clark Corp (KMB), Chevron Corporation (CVX): A Giant Dividend Grower for Your Retirement Portfolio

I have a few suggestions for those of you in or near retirement and looking to add another dividend stock to your portfolio.

Based upon my experience, I chose a few criteria that I consider important when selecting dividend-growth stocks that keep up with inflation over the long term (and don’t keep you up at night). These criteria include:

1. Moderate yield (3% to 3.5%)

2. Dividend increases every year for a long period of time (25 years is a good timeline to use.)

3. Market cap of over $100 billion (a company that size will not easily fail.)

4. Companies from the consumer-products (except tobacco) sector and the oil/gas industry (since I am familiar with them)

A screener I used spit out three stocks (one of which I already own). Several other companies fell just short in one or more of the categories. They can be considered at another time.

I discuss each of the three candidates in detail below and go beyond the screening criteria to make the case to buy the stock or not based upon the dividend and other fundamentals.

Not a close shave

The consumer-products titan The Procter & Gamble Company (NYSE:PG) is currently in my portfolio. The owner of brands like Crest, Pampers, Tide and Gillette, all items that people need regularly, rakes in the cash, which allows it to pay a dividend of $2.41 per share per year. The dividend has been increased every year since 1956 and grown at a 9% compounded annual rate since 2008. The current yield is just over 3%.

The Procter & Gamble Company (NYSE:PG) has all of the ingredients in place to keep the dividend rising:

1. Payout ratio of 50% leaving some space to grow the payments;

2. Modest debt (32% long-term debt-to-equity ratio);

3. Improved growth outlook after a management shakeup that brought back former CEO A.G. Lafley;

4. Plenty of free cash flow ($3.2 billion)

Maker of Huggies on the right path

Another consumer-products company that has been a dividend stalwart for over 25 years is Kimberly Clark Corp (NYSE:KMB). It has increased the dividend, currently at $3.24 a share, by 6% per year over the last half decade. The yield is around 3.3%.

Can the company keep it up?

Let’s take a look:

1. Slightly elevated payout ratio (66%) but still a little room for expansion;

2. A high long-term debt-to-equity ratio of 97%, so it might have difficulty in the future increasing the dividend unless some debt is paid down;

3. Earnings have been increasing recently but total growth has been relatively flat over the last five years (this may need to be watched for a bit to see if the trend continues.)