Kimberly-Clark's (NYSE:KMB) dividend and its business outlook are headed in opposite directions right now. The consumer goods giant is on pace to log its second straight year of decelerating growth as organic sales fall to below 2% in 2017 from 5% in 2015. The dividend, on the other hand, grew 5.4% this year to mark a solid uptick over last year's 4.5% hike.

These opposing forces can't live on the same income statement forever, so below we'll look at the major risks to income investors who expect steady, market-beating dividend growth from Kimberly-Clark's stock.

Counting coins.

Image source: Getty Images.

Sales and profit trends

Kimberly-Clark kicked off fiscal 2017 with a disappointing 1% drop in organic sales as a small boost in volume was overwhelmed by lower selling prices. The price decline was especially bad in the U.S. market, which accounts for over half of the business and well over half of profits. Kimberly-Clark was forced to match rivals' promotions here as industry growth slowed to near zero. This strategy resulted in a 3% organic sales drop in what CEO Thomas Falk called a "challenging environment" for branded consumer products companies. 

As it is more leveraged to the U.S. geography than its peers, Kimberly-Clark's growth pace is now trailing rivals. In fact, Procter & Gamble (NYSE:PG) could beat its smaller rival for the first time in years, given that the consumer goods titan is predicting 2.5% organic gains in 2017. Unilever is seeing even stronger growth of closer to 4%.

However, a few big factors are helping protect Kimberly-Clark's profits even as its expansion pace stalls. For one, foreign currency swings aren't dragging on earnings results as they have for years. Meanwhile, the company is overperforming on its cost-cutting plans, having removed $100 million from its expense infrastructure just this past quarter. These trends combined to push operating profit higher by 4% last quarter despite zero growth in net sales.

Payout outlook

The healthy financial improvement meant that Kimberly-Clark's payout ratio declined significantly last quarter. This is part of an encouraging trend for income investors. The company had recently been paying nearly 70% of its earnings out as dividends but now the ratio is improving to closer to 50%, or about where P&G is sitting. 

KMB Payout Ratio (TTM) Chart

KMB Payout Ratio (TTM) data by YCharts.

Kimberly-Clark is aiming to get its operating margin up to around 20% of sales, which would put it right near P&G as one of the most profitable consumer products companies on the market. If it achieves this result, it will be mainly thanks to cost cuts that total over $400 million this year following last year's $500 million of savings.

Thus, there's very little danger of Kimberly-Clark needing to pause dividend hikes or cut its payout in the near future. The dividend aristocrat's 45-year track record of annual raises seems set to climb toward the half-century mark.

Over the long term, though, this dividend will track operating results, and so its outlook depends on Kimberly-Clark's ability to speed organic sales gains back up toward the 5% mark it enjoyed a few years ago. If it stumbles for another year, income investors could easily endure the type of tiny payout boost that P&G announced in 2016. 

Kimberly-Clark executives hope they can avoid that scenario by taking steps toward faster growth starting in the second half of 2017. That's when they'll be ramping up marketing spending to support several innovations in the blockbuster Huggies and Kleenex franchises, which might spark improving pricing trends.

Demitrios Kalogeropoulos has no position in any stocks mentioned. The Motley Fool recommends Kimberly-Clark and Unilever. The Motley Fool has a disclosure policy.