One of the benefits of owning a diversified consumer goods stock like Kimberly Clark (NYSE:KMB) is that you're unlikely to suffer from dramatic swings in the business. Demand for diapers and tissue paper doesn't change much, after all, so earnings and sales growth tend to hold steady and produce boring, but consistently positive gains.

Kimberly Clark kept up its side of this bargain by delivering modestly higher revenue and profits this year. However, 2017 tilted toward the negative for this business as its operating trends worsened compared to peers like Procter & Gamble (NYSE:PG) and Unilever (NYSE:UL).

A baby plays with tissue paper.

Image source: Getty Images.

Growth was weak

Kimberly Clark's final quarterly report of the year was highlighted by an encouraging return to sales gains, with organic growth speeding up to a 1% pace from a 1% decrease in the prior quarter. Yet the improvement didn't push the company off its generally weak expansion pace.

Organic sales are set to end up flat for the year, which is below the 2% gain the company logged last year (and even further from the 5% spike shareholders witnessed in 2015). CEO Thomas Falk and his team had initially predicted a steady 2% growth rate in 2017, but they were forced to lower that target after early results failed to meet expectations.

Industry peers are faring better, in part because they don't rely on the difficult U.S. market for as big a chunk of their business. Procter & Gamble is growing at a 2% rate, while Unilever is targeting a 4% increase for the year. Both rivals describe the global selling environment as challenging, but they've found a way to protect market share while Kimberly Clark has struggled in this area.

Cost cuts helped

Kimberly Clark has offset those growth challenges with deep cost cuts. In fact, the company is on track to beat its goal of slicing $400 million out of its annual expense burden in 2017. These savings are pushing profitability higher even though prices for branded goods like Huggies diapers and Kleenex tissue aren't rising much.

PG Operating Margin (TTM) Chart

PG Operating Margin (TTM) data by YCharts.

Operating margin is now above 18% of sales, putting Kimberly Clark ahead of Unilever. Both companies trail industry leader Procter & Gamble, which has taken a more aggressive approach to cost-cutting, having reduced annual expenses by about $2 billion in each of the last four years. Unilever and Kimberly Clark are each hoping to eventually reach P&G's 21% operating margin, but that could prove challenging without the type of aggressive restructuring process that P&G has undergone since fiscal 2014.

Looking ahead

Cost savings are helping fund $2.3 billion of cash returns to shareholders in 2017, or just above the prior year's $2.1 billion. As usual, the Dividend Aristocrat is allocating that spending toward a mix of stock repurchases and dividend payments, but Kimberly Clark is prioritizing its dividend payout.

The slight earnings increase that management is targeting for the full year is a consequence of cost savings, since sales will likely be flat. Thus, investors can expect a modest dividend increase in early 2018 that trails 2017's 5.4% hike.

Ultimately, shareholders can be relieved to see rising total returns from the business in a tough global market for branded consumer goods. Looking forward, Kimberly Clark's 2018 performance will likely rest on management's ability to keep sales growth from turning negative after two consecutive years of slowing gains.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.