A Portfolio of Safety Stocks: General Mills, Inc. (GIS), Sysco Corporation (SYY), and More

Kimberly Clark Corp (NYSE:KMB)

Kimberly-Clark is a leader in several major household product categories such as diapers, facial tissues, and paper towels.  This company has a portfolio of leading brands that includes Depends, Huggies, Cottonelle, Kleenex, Kotex, and Scott.  On the positive, Kimberly-Clark is expected to earn at least $5.50 in FY13 and $6.00 in FY14, is cutting costs and improving its gross margins, and is well-positioned to benefit from exposure to emerging markets as incomes rise.  Over the long term, this company will continue to return cash to shareholders through dividend increases and share buybacks.

On the other hand, Kimberly-Clark is having problems in Europe where it may end up having to dial it down a notch.  And like many other companies, Kimberly-Clark faces a significant threat from private label brands.

All in all, Kimberly-Clark is a very well-managed company that is investing in new products and businesses, maintaining gross margins of existing products and businesses, focusing on sustainable profitable growth, and should continue to deliver moderate earnings and dividend growth of 7% – 8% as well.

3 Critical Considerations

1). Price.  These four companies are all great companies.  There is no doubt about that.  But price matters – a lot.  That said, I would not purchase any of these companies at an earnings multiple of more than 15.  And I would shoot for a multiple of 12 or less for Johnson & Johnson.

2). Dividend Yield.  All of these companies currently have dividend yields of around 3%.  I would like to see that closer to 4%.

3). Market and Sector Performance.  The majority of these companies will more or less perform in line with the market.  Except they will trade within a tighter range.  That is why finding a good entry price matters.

My Foolish Take

All of these companies are very solid companies.  You cannot expect any of these companies to deliver huge returns.  But you can expect them to provide reasonable returns with minimal downside risk.  Finding an attractive entry point is critical.  I would wait for a significant market pullback before considering any of these companies because almost all of these companies are trading near their 52-week highs.

The article A Portfolio of Safety Stocks originally appeared on Fool.com and is written by Ryan Peckyno.

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