In this low interest rate environment, investors have turned
to high-yielding blue-chips as a source of retirement income.
This five-part series will outline what we believe to be the top
fivedividend aristocrat stocks, most suitable for a retiree's
In recent years, retirement planning has become a whole lot
harder. With interest rates near all-time lows, keeping money in
the bank just doesn't add up.
One key alternative is the stockmarket . Although investing in
stocks can at times be tricky, a safe haven is high-quality,
defensive, dividend-paying stocks. Within this group are my
favorites: the "dividend aristocrats ."
are companies listed on the S&P 500 that have increased their
every year for at least the past 25 years. These stocks have
weathered many storms. They are companies with stable and reliable
business models. Most often, they are solid money makers. While
can mask shortfalls in revenues and sometimes even
, it can't hide rising dividends for very long.
Over the next five articles, we will apply both technical
andfundamental analysis to describe our top five favorite dividend
Our No. 1 pick is
##This international health, hygiene and paper company operates
in more than 150 countries across the globe. Its most popular
brands include Kleenex tissue, Scott toilet paper, Huggies and
Pull-Ups diapers, Kotex sanitary products and Depend incontinence
Aggressive cost cutting, expansion into
and the introduction of higher-end, higher-margin products are
factors which have been driving the stock higher.
But, what makes the company so attractive, in addition to its
capital gains potential, is its healthy dividend and solid
projected revenue and profit-growth outlook.
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This dividend aristocrat currently offers a healthy 3.8% annual
($2.84/$74.11). In contrast, interest rates on 10-Year U.S.
Treasury notes are currently around 2.1%, just more than half of
the Kimberly-Clark yield.
Kimberly-Clark's dividend has consistently increased for the
past 39 years. Best yet, management stated it will likely increase
the dividend again in April 2012 -- marking the 40th straight year
of dividend increases!
The increase is likely to occur following the release of
first-quarter results on April 20. As such, Kimberly Clark's
projected forward annual yield should be around 4%.
From a technical perspective, Kimberly Clark's stock is on a
strong growth trajectory.
As the above chart shows,
have been on a
for the past two years.
In August 2011, an accelerated uptrend line formed as the stock
rose from a low of $59.17 to a late 2011 high of $73.49.
The stock then entered a "U" shape basing pattern. Basing
and usually imply that the stock will move higher. When a stock
completes a basing pattern or "breaks out," you can use atechnical
analysis concept called themeasuring principle to forecast an
I won't trouble you with the intricacies of this calculation --
there's a detailed explanation of the
in the financial dictionary on this site -- but the stock should
reach at least $77.20, about a 4% return from current levels. When
dividends are factored in, the return to shareholders should be
about double that. As the company grows earnings over time, the
share price should also gradually increase.
, a buy/sell indicator, appears to be giving a fresh buy signal,
indicated by the black line crossing above the red. The MACD
histogram has just risen into positive territory. Both of these are
bullish technical signals.
##These bullish technicals are backed by strong a fundamental
For the first quarter of 2012, analysts project increased demand
in emerging markets will cause revenue to notch up 0.3% to $5.04
billion -- from $5.03 in the first quarter of 2011.
For the full 2012 year, the 12 analysts following the company
expect heightened demand will cause sales to increase 0.6% to
$20.96 billion, up from $20.85 billion a year ago.
With strong sales and higher sales volumes, analysts estimate
full-year 2013 revenue will rise a further 2.4% to $21.47
The earnings picture is similar.
For the first quarter of 2012, analysts expect earnings to rise
7.3% to $1.17 per share, up from $1.09 per share in the first
quarter of 2011.
With expansion into international markets, the company projects
full-year 2012 earnings will be in the range of $5-$5.15 per share
-- a 4% to7% increase from earnings of $4.80 per share in 2011.
As international growth continues, analysts project full-year
earnings in 2013 will increase a further 7.8% to $5.50 per share.
As earnings grow, the share price should rise along with it
providing strong, stable returns over time.
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The Investing Answer:
As with any investment, there are risks to consider. If
heats up and material costs rise, Kimberly-Clark's
margins could be negatively affected. Furthermore, if international
expansion slows, so would overall growth.
However, given that the company makes essential products, many
of which cater to an aging population, the company should be able
to maintain its large customer base. As well, since the company
offers an attractive, stable dividend, shareholders are likely to
keep sustained interest in the stock.
Given that the Kimberly-Clark appears technically strong, shows
fundamental growth potential and offers a solid dividend, those
looking for a stable, high-yielding investment may wish to add the
stock to their investment portfolio.