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 I believe to be the top five
aristocrat stocks, most suitable for a retiree's portfolio.
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 stock
. 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 dividend 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 creative
can mask shortfalls in revenues and sometimes even
, it can't hide rising dividends for very long.
One of my favorite dividend aristocrats 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 products.
Aggressive cost-cutting, expansion into
and the introduction of higher-end, higher-margin products are
factors that 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.
This dividend aristocrat currently offers a healthy 3.8% annual
. In contrast, interest rates on 10-Year U.S. Treasury notes are
currently around 2.1%, just more than half of the Kimberly-Clark
Kimberly-Clark's dividend has consistently increased for the past
39 years. Best yet, the company just increased the dividend again
-- marking the 40th straight year of dividend increases.
From a technical perspective, Kimberly Clark's stock is on a strong
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
The stock then entered a "U" shape basing pattern. Basing patterns
and usually imply that the stock will move higher. When a stock
completes a basing pattern or "breaks out," you can use a
concept called the
to forecast an immediate
I won't trouble you with the intricacies of this calculation --
there's a detailed explanation of the measuring principle in the
financial dictionary from Investing Answers, our sister 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
outlook. For the first quarter of 2012, increased demand in
emerging markets cause revenue to notch up 4.0% to $5.20 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 should rise a further 2.4% to $21.47
The earnings picture is similar.
For the first quarter of 2012, earnings rose 37.2% to $1.18 per
share, up from $0.86 per share in the first quarter of 2011.With
expansion into international markets, the company projects
full-year 2012 earnings to 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 to 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.
Risks to Consider:
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.
Action to Take -- >
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.
-- Dr. Melvin Pasternak
Melvin Pasternak does not personally hold positions in any
securities mentioned in this article. StreetAuthority LLC owns
shares of KMB in one or more if its "real money" portfolios.
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