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Kimberly Clark Corp (KMB), The Procter & Gamble Company (PG): Boring Can Be Beautiful With This Company

Kimberly Clark Corp (NYSE:KMB) is in the boring business of paper towels, tissues, diapers, baby wipes, toilet paper, and feminine hygiene products. The business isn’t exciting, but it’s very profitable and Kimberly Clark Corp (NYSE:KMB) has built a large moat for itself. To put it in perspective, consider that:

The company’s leading brands are sold in more than 175 countries.

Kimberly Clark Corp (NYSE:KMB) has been in business for more than 140 years.

Nearly 25% of the world’s population purchase its products every day.

Among its brands Kleenex, Scott, Huggies, Pull-Ups, Kotex, Poise, and Depend, Kimberly Clark Corp (NYSE:KMB) holds the number one or two brands share in more than 80 countries.

Kimberly Clark Corp (NYSE:KMB)

Besides being in a boring business, the way the stock trades is actually boring and that’s a great thing. The stock has a beta of zero. But what isn’t boring is the dividend and the dividend growth. The company pays an annual dividend of $3.24 per share for a yield of 3.30%. In February the company raised the dividend 9.5% and that marked the 41st consecutive annual increase in the dividend.

In the first quarter, Kimberly Clark Corp (NYSE:KMB) purchased $500 million in stock and plans to purchase a total of $1 billion to $1.2 billion this year. Kimberly Clark Corp (NYSE:KMB) is a very shareholder-friendly company and I see the company continuing its record of increasing the dividend and repurchasing shares.

In the first quarter of this year, sales grew 1% to $5.3 billion. Gross margin increased 140 basis points to 34.6%. Earnings per share rose 19% to $1.48, which was better than management guided three months prior.

Going forward, I still see plenty of growth for Kimberly-Clark in international markets. The company is getting aggressive in expanding its capacity in international markets. Kimberly-Clark is building a new diaper plant in China. By adding capacity in China, the company can boost margins from having to import less into that growing market.

In Venezuela, Kimberly-Clark is investing $37 million to expand its operations there. The company currently has 15% of the toilet paper market in Venezuela, but that number is likely to grow with this investment and the nation is dealing with a critical toilet paper shortage since the new government took office. The investment in Venezuela will allow the company to expand its capacity by 30% to 40%.

The competition

Kimberly-Clark has a very strong competitor in The Procter & Gamble Company (NYSE:PG).

The Procter & Gamble Company (NYSE:PG) competes with its Bounty paper towels, Charmin toilet paper, Pampers and Luvs diapers, Puffs tissues, and Always and Tampax feminine hygiene products.

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