Is it Time to Buy the S&P 500’s Worst Performing Dividend Giants?

Soaring stocks get most of the attention on Wall Street, but the best deals often stay under the radar. Sure, a slumping stock price might indicate a faltering business that investors might want to avoid. But in many cases, it’s simply Wall Street ignoring a strong company as pros chase riskier high-growth stocks instead.

With that in mind, lets look at a few dividend giants that haven’t participated in the 40% stock-market rally since mid-2020. The declines that Clorox (NYSE:CLX), Kimberly Clark (NYSE:KMB), and Intel (NASDAQ:INTC) have posted over that time might set investors up for impressive returns.

Person on couch looking at stock chart on laptop.

Image source: Getty Images.

Kimberly Clark pays a meaty dividend

Kimberly Clark, like its chief rival Procter & Gamble (P&G), had a strong pandemic year as organic sales growth accelerated to 6% from 4% in 2019. While each of those core metrics trailed P&G, the company generated lots of cash and won market share in key niches like diapers.

Investors have pushed Kimberly Clark’s stock lower as they brace for a growth slowdown that should mean organic sales hold flat in 2021. Wall Street is also worried about potentially weak profits as material costs spike.

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But Kimberly Clark is slashing expenses and has a stacked pipeline of innovative releases on tap across its consumer essentials. Value-focused investors will like its prospects of steady, profitable growth, despite the likelihood that both metrics continue trailing P&G. They’ll be compensated for that gap by a 3.3% dividend yield that’s almost a full percentage point higher than the industry-leader’s payout.

Intel can’t find the growth

Intel notched a fifth consecutive year of sales records in 2020, but there are dark clouds on the horizon. Sales were flat in Q1 due to slumping demand in its data center division, and the chip giant is forecasting a 6% drop for the full fiscal year. Manufacturing and supply-chain stumbles, meanwhile, are contributing to a sour 2021 outlook for this business.

On the bright side, Intel is cash rich, pays a meaty dividend for a tech stock, and is valued at a big discount compared to peers like AMD. Yet investors are right to demand signs of improving market-share performance in the PC and data center niches before buying this struggling stock.

Clorox will keep winning

There’s no obvious reason for Clorox shares to be underperforming the market this year. The cleaning-giant’s growth slowed in early 2021, compared to its pandemic-fueled spike. Organic sales were flat in fiscal Q3, which runs through March, after jumping 15% in the year-ago period.

Clorox is still on track to deliver its best fiscal-year performance in 20 years. CEO Linda Rendle and her team believe the cleaning and home-maintenance niche will see persistently stronger growth following the pandemic, even though the next few quarters will face unusually hard comparisons. Consumers are likely not going to abandon the new priority they’ve placed on home maintenance.

Clorox had attractive growth and profitability trends even before the pandemic powered record growth on both metrics. Since then, the dividend yield has climbed to about 2.5%, thanks to a declining share price and Clorox’s recent 5% annual payout raise.

Those factors should help ensure that this Dividend Aristocrat doesn’t trail the S&P 500 for much longer.

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.

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