New Buys: Kimberley-Clark (KMB) and Cardinal Health (CAH)

With both the Dow and the S&P 500 refusing to stop setting records, it’s nice to find some great dividend growth stocks on sale every now and then.

Two existing positions in my portfolio continued to show price weakness – giving me a great opportunity to add more and lower my cost basis in the process.

On September 9 I added 9 more shares of Kimberley-Clark (KMB) for a total of $1,073.

And on September 11 I bought 15 additional shares of Cardinal Health (CAHfor a total of $1,0475.

I refer back to my recent post on Kimberley-Clark for a more detailed analysis on this dividend growth stock.

In this post I will cover Cardinal Health, why like the stock enough to add more and what both purchases mean for my forward dividend income.

Cardinal Health, Inc. operates as an integrated healthcare services and products company worldwide.

The company’s Pharmaceutical segment distributes branded and generic pharmaceutical, specialty pharmaceutical, over-the-counter healthcare, and consumer products to retailers, hospitals, and other healthcare providers.

The company’s Medical segment manufactures and sources medical, surgical, and laboratory products, including cardiovascular and endovascular products; wound care products; surgical drapes, gowns, and apparel; exam and surgical gloves; fluid suction and collection systems; and incontinence, enteral feeding, urology, operating room supply, electrode and needle, and syringe and sharps disposal product lines.

It also distributes medical, surgical, and laboratory products to hospitals, ambulatory surgery centers, clinical laboratories, and other healthcare providers, as well as to patients in the home; and assembles and sells sterile and non-sterile procedure kits.

The company was founded in 1979 and is headquartered in Dublin, Ohio.

By the way: the location of it’s HQ should not be confused – as I initially did – by Dublin, Ireland where so many US companies have ‘moved’ to.

Cardinal’s current dividend yield is 2.74% –  below the average 3.5% yield I strive for in building my portfolio.

The company is featured on David Fish’s list of Dividends Champions, Contenders and Challengers – boasting a 21 year streak of growing dividend pay-outs.

The 5 year dividend growth is a decent 14.25% – with last year’s dividend growth coming in at 3.01%.

CAH’s Earnings per Share (EPS) over the last five years shows an 5.66%  increase. Projected EPS growth for next year as compared to the current year is 11.90%.

The trailing 12 months Price/Earnings (P/E) is 16.71, which is well below it’s 5 year average of 26.92. It is also significantly lower than the industry’s 5 year average of 23.57.

EVA Dimensions (an equity research firm) states in their September 15 report that CAH‘s Performance Risk Valuation score is at the 67th percentile of all firms in its industry, which leads to a recommendation to Buy.

It adds that Kimberley-Clark is more attractively priced in relation to its true value than well over half of the stocks in its industry.

Ford Equity Research recommends a ‘hold‘ with a 12 month range of 52-week price range of $64.36 – $83.80.

Jefferson Research concludes that Cardinal is showing strong Earnings Quality, Cash Flow Quality, Operating Efficiency and Balance Sheet Quality, and Valuation suggests a lower amount of price risk. When combined, CAH deserves a ‘buy’ rating.

Given Cardinal’s annual dividend of $1.85 per share this purchase increased my forward annual dividend income by $28. 

The additional 9 shares of Kimberley-Clark added $35 to my forward dividend cash flow.

What do you think about Kimberley-Clark and Cardinal right now? Are you buying other dividend growth stocks? Leave a comment/reply to share your thoughts!

Author: Tall Investing

www.tallinvesting.com

5 thoughts on “New Buys: Kimberley-Clark (KMB) and Cardinal Health (CAH)”

  1. I’m curious where you’re getting the 11.90% growth rate for Cardinal Health’s EPS next year? The slide deck from the most recent earnings release is projecting adjusted EPS of $4.85 – $5.10 in 2018 compared to 2017’s actual value of $5.40.

    That is a 5.6% DECLINE for the optimistic side of the range.

    Slide deck referenced (slide 13 of 30):

    https://seekingalpha.com/article/4100168-cardinal-health-inc-2017-q4-results-earnings-call-slides?part=single

    Also, their free cash flow situation fell off a cliff this year compared to 2016.

    I’ve seen a lot of activity in CAH around the dividend blogosphere lately. I hope it works out for everybody, but I’m passing on this one.

    I know it’s a different part of the health care sector, but I much prefer CVS right now.

    1. Hi Catfishwizard,

      Thanks for this – always glad to see people reading the details of my writings 🙂

      I took these numbers from Fidelity Research who expects the following:

      Projected EPS Growth (Next Year vs. This Year) +11.90%
      Forward EPS Long Term Growth (3-5 Yrs) +5.54%

      Agree on the FCF – this is a challenge and will likely continue throughout 2017 and 2018. On the other hand, I believe the current price allows to get in on 21 year dividend growth streak with an almost all time high in dividend yield.

      I like CVS as well.. one of my larger positions.

      Cheers
      Tall Investing

  2. Hi! I enjoyed the article and how detailed everything is, with the numbers and values all shown. It looks really interesting! I still no clue about divided investing, but hopefully I can pick up something useful over here!

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