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Kimberly Clark (KMB): New Stock In My Dividend Yield Passive Income Portfolio

 January 25, 2013 07:17 PM
 


Kimberly Clark (KMB) was my latest choice when I thought about what kind of stock should be the next buy for my Dividend Yield Passive Income Portfolio DYPI. The portfolio has now 16 stocks and was funded virtual with $100,000 on October 03, 2012.

Since the date of funding, I put every Friday one great dividend growth stock into the portfolio. The total purchasing amount was $22,730.35 which gives me a total estimated dividend income of $734.93. Not enough, I like to increase the number of stocks to a total of 50-70 by the end of this year.

Stock acquisitions shouldn't be a big problem. Sure stocks are not cheap but high quality stocks have a high price and you must pay it. Dividends included, I still have $78,926.55 of free cash to boost my dividend income to a total value of $3,000 - $4,000 per year.

[Related -Colgate-Palmolive (CL) Dividend Stock Analysis]

I personally have an annulized five-figure dividend income and made most of my private wealth with dividend growth stocks. One of my trading accounts shows that I have increased my starting capital by the factor of 6.6 over the recent decade. Two-third of my income were capital gains and one-third dividend payments.

What I like to show with the DYPI-Portfolio is that you can make money with dividend stocks in every market situation. All you need is patience, a focus on high quality stocks with a broad diversification and a trustful management as well as a long-term investment horizon.

If you do so, you will make money by stock trading. I am not sure if I should use this word "trading" because it is more a strategy of buy and hold.

[Related -Jobs Growth Tepid At Best]

Why put I Kimberly-Clark into the DYPI-Portfolio?

First, the company doesn't appear often on my screens. That show that the company has not yet attractive fundamentals in anyway. KMB is not cheap, the current P/E ratio is at 18.28 and forward P/E is at 15.56. Earnings per share are expected to grow by 6.69 for the next year and 9.37 percent for the upcoming five years.

Past earnings per share growth were possible due to massive stock repurchase programms financed with debt. That's one of the reasons why I don't like the company so much as consumer stock. Sure, out there are so many companies with a lower quality but you must know that I talk on highest levels. What I mean is in relation to Coca Cola and Procter & Gamble. That's the reason for underweighting the stock. The portfolio share of KMB in my DYPI-Portfolio is at 1.3 percent.

What makes Kimberly-Clark?

Kimberly-Clark engages in manufacturing and marketing health care products worldwide. The company operates in four segments: Personal Care, Consumer Tissue, K-C Professional and Other, and Health Care. The Personal Care segment manufactures and markets disposable diapers, training and youth pants, swimpants, baby wipes, feminine and incontinence care products, and related products under the various brand names, including Huggies, Pull-Ups, Little Swimmers, GoodNites, Kotex, Lightdays, Depend, and Poise.

Half of the revenues came from the Americans region, 15.42 percent from Europe, 1.81 percent from Australia and 26.79 percent from Asia.

I bought 15 stocks with a total value of $1,302.30. This buy will give me more stability to my DYPI-Portfolio because KMB is a stock with a very low beta ratio (Beta: 0.3).  

The whole portfolio is 0.82 percent up since the funding date. That is not much because the broad market, measured with the S&P500, increased during the same period 3.08 percent. The Dow Jones was up 1.3 percent.

However, the return is so low because I have still a huge amount of not invested capital. The invested capital gained 3.18 and beat the return of the S&P 500. I ever told that this strategy will underperform if the market goes sharply up. But this not what I like to show. I don't want to teach you how to make fast money and to get quick rich. I like to show you how to make money with solid dividend growth stocks over a long period. This could result in a yearly double-digit return, a performance that I have realized over the recent decade.
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