Yesterday I added to my Kimberly-Clark position. Now I have to admit to the possibility (probability?) that it’s overvalued. Passive Income Pursuit made a good case to this effect in his recent article on Seeking Alpha. Besides our differences – his being growth oriented whereas I don’t mind the “bond like quality” – there are (I feel) a couple of gaps in his analysis.
First, KMB has demographics on its’ side. Not only diapers, as mentioned, but elder care products as well. Second it’s not clear that the article fully accounted for the HYH spin other than to note an increase in goodwill. Granted, KMB has some headwinds but in a normal economic cycle my guess is they would be out in front of them already. KMB is Exhibit A for the so called ‘Earnings Recession’ the TV talking heads like to banter about.
Therefore I added to my existing position at $130.15 per share. This will increase KMB’s share of my dividends from 3.43% to 4.09% (with a target maximum of 6%) and provide an initial yield of about 2.8%. At least I’m leaving a little room to add in the event of a dip. 🙂