3 Reasons Kimberly-Clark Stock Could Rise

Consumer products giant Kimberly-Clark's  (NYSE: KMB  )  stock has had a nice run, climbing 11% during the past year, and that doesn't include its solid dividend payments. Shareholders have done very well during this time, and there may be further upside potential.

That's because Kimberly-Clark has kept its status as a steady provider of revenue and earnings growth. It also increases its dividend each and every year, and on top of all this it offers a catalyst in the form of a potential spin-off. Here are three reasons that there may be further room for the company's shares to run.

Revenue and earnings growth

Despite what you might instinctively think about a company that makes tissues, diapers, and paper towels, Kimberly-Clark is no lumbering giant. The company is still posting solid growth. Kimberly-Clark grew sales by just 1% last quarter, but its total sales are a misleading picture of the company's true performance. Stripping away the effects of currency translations, organic sales increased a much more satisfactory 5%. Adjusted earnings per share, which also remove one-time, nonrecurring items, increased 5%, as well.

Strong growth is being led by its international operations, where organic sales increased 10% last quarter. Kimberly-Clark noted strong performance in several emerging markets last quarter, including China, Brazil, Russia, and South Africa, due to rising volumes.

This was much better performance than consumer products competitor Clorox, which posted just a 0.5% increase in currency-neutral sales last quarter. Its adjusted earnings fell 5, as Clorox fell victim to higher manufacturing and logistics costs, as well as slumping sales in some of its key categories, such as cleaning and household products.

Growth flowing through to dividends

As Kimberly-Clark successfully puts up growth in sales and profits, its dividend follows suit. It yields a very healthy 3%, which is great for income investors, considering high-yielding stocks are hard to find these days.

The company has a great reputation in the realm of shareholder rewards, and takes its commitment to providing regular dividend increases very seriously. It has raised its dividend for 42 years in a row, and 2014 marks the 80th year in a row in which the company has paid dividends.

Its dividend growth is a strong argument for investing in Kimberly-Clark. During the past five years, it's upped its payout at a 7% compound annual rate. As the company steadily increases its dividend, its share price stands to benefit, as well. 

Healthcare spinoff

Kimberly-Clark is pursuing a spinoff of its healthcare unit. This could be an additional catalyst, because Kimberly-Clark believes that it, and the subsidiary, would be worth more than the company in its current form. This is a fairly typical move for companies that believe higher-growth segments would be awarded a higher valuation multiple as a separate entity.

This would be a tax-free event for shareholders, and create an independent company called Halyard Health, which would generate approximately $1.7 billion in annual sales and hold leadership positions in the surgical products and medical devices markets. Kimberly-Clark anticipates completing the spinoff at the end of October.

The Foolish takeaway

Kimberly-Clark is a highly profitable company with lots of strong consumer brands. It puts up steady results every year, and is able to generate solid growth. In addition, it returns the favor to investors by growing its shareholder rewards every year.

Also, the company is pursuing a tax-free spinoff that has the potential to increase shareholder value. Because of its revenue and earnings growth, dividend growth, and impending spinoff of its healthcare unit, investors have several reasons to be bullish on Kimberly-Clark.

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