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Strategies & Market Trends : Dividend investing for retirement -- Ignore unavailable to you. Want to Upgrade?

To: Steve Felix who wrote (27005)	4/8/2017 12:07:47 PM
From: E_K_S	2 Recommendations Recommended By CusterInvestor Steve Felix Read Replies (1) \| Respond to of 34328

Re: Household & Personal products Kimberly-Clark Corporation (KMB): 2.96% div yield ($47Bln market cap) Kimberly-Clark de México, S. A. B. de C. V. (KCDMY): 3.4% div yield ($4bln market cap) Orchids Paper Products Company (TIS): 5.4% div yield ($237mln market cap) Industry Overview: Household Products From the article: Household Products equities can be classified as defensive investments. They perform well during good economic times, and provide solid downside protection in challenging periods. The industry is mature, and sales and earnings streams are relatively steady throughout the business cycle. The largest Household Products companies have long histories of acquisitions and divestitures. Their managements commonly seek to acquire small outfits or product lines that will complement existing offerings. Such asset purchases can help to maintain top- and bottom-line growth. Return on investment, though, is more important than expansion of scale. The better run operations do not hesitate to sell or spin off underperforming lines. Managements’ attention is best spent on the most profitable products. --------------------------------------------------------- One of my best dividend payers w/ growth is KMD. My original buy was in 3/2010 @ $58/share. I calculated their CAGR at 12.33% over the 7 years I have owned it. I have peeled off 50% of that original position and have been buying TIS as KMB shares were getting extended in several valuation metrics I follow. Specifically, KMB's Book Value (BV) has been falling over the last several years as their payout % has increased from increasing their annual dividend. Also revenues and revenue growth have declined over the last 36 months (if not longer) but they have managed to maintain cash flows. If you look at Kimberly - Clark de Mexico SAB de CV ADR KCDMY , their Mexican unit, at 8.5% of the market cap of it's parent KMB ($4bln vs $47Bln), growth, cash flows and BV are all growing especially for the last 60 months. I think the parent just got too large and was having problems expanding into the new growth regions that would move the needle for the company (very difficult for a $47Bln market cap company). I started following KCDMY early last year when the Mexican Peso was falling vs the $US and had the chance to pick up some of their ADR shares in the $7.50/share area. I passed and decided on TIS instead. There was too much risk w/ the $US currency Peso exchange rate exposure IMO. -------------------------------------------------------------------------- In May 2014 TIS enters into a JV deal w/ privately owned Fabrica paying an aggregate amount of $36.7mln (19% ownership of TIS stock and equal amount of cash $16,7mln). TIS paid 2x Fabrica's 2013 U.S. sales for their U.S. business that included low cost production commitments for the term of the agreement (a 20 year term). Orchids Paper Products Company Enters Strategic Alliance With Fabrica de Papel San Francisco, S.A. de C.V Originally, I failed to recognizance the significance of this JV agreement/alliance but after drilling down on KMB's Mexican unit- KCDMY (Q4 2016), they booked revenue growth for the last 24 months of +10% per year. KCDMY's other valuation metric are impressive too (increasing BV over last 36 months). So Mexico is/has been a huge growth engine for KCDMY and by extension also for Fabrica de Papel San Francisco, S.A. de C.V. The investment/value thesis gets more interesting. Fabrica is a private company but if they have a similar market cap as KCDMY (ie $4Bln), Fabrica would almost be 15x the size of TIS w/ revenues growing at 10% per year (similar to the early growth years of KMB in the 90's). Fabrica is not going away as they inked a 20 year JV agreement that allows them to participate in TIS's U.S. growth (currently a 19% interest but may/could be more in the future) and FCF of both companies continue to grow along w/ BV. Conclusion - The more I dig into this Fabrica deal, their JV agreement, past/current growth prospects, I like how the pieces fit. These companies are not the mature KMD but they both have some of the best components specifically rising BV, growing revenue (10% per year) and FCF and hopefully a stable growing dividend in the out years. Holdings: Household & personal products (Note: over weight position in TIS for IRA/ROTH) KMB was a top 10 holding in taxable portfolio at 3.5% . . . now 1% & TIS at 2.8% IRA/ROTH no KMB and TIS at 5.6% EKS