Key Takeaways
- A $1.5 million portfolio split evenly across Clorox, Kimberly-Clark and PepsiCo pays $67,627 a year in dividends at today’s prices, or about $5,640 a month.
- Clorox has the thinnest coverage of the three, paying out 133% of its free cash flow over the twelve months to Sept. 30.
- If Clorox halved its dividend, the income would fall to about $56,100 a year, and to about $44,500 if it stopped paying.
- Kimberly-Clark’s newly closed Kenvue deal and PepsiCo’s lowered earnings outlook are what to watch for the other two.
Consumer staples have long been where retirees go for dividend income, and today Clorox (CLX), Kimberly-Clark (KMB) and PepsiCo (PEP) all yield more than 4%.
So let’s take a hypothetical retiree who splits $1.5 million evenly across the three at today’s prices. That buys about 4,680 shares of Clorox, about 4,510 of Kimberly-Clark and about 3,490 of PepsiCo, and together their dividend checks come to $67,627 a year, or about $5,640 a month.
That’s a 4.5% yield on this part of the portfolio. (Of course, no one should ever own just three stocks.) But a check is only as good as the cash behind it, and all three companies are fighting higher costs right now:
| Stock | Shares | Cost | Income a year | Share of income | Cash dividend payout ratio (TTM) |
|---|---|---|---|---|---|
| Clorox (CLX) | 4,627 | $499,947 | $23,135 | 35% | 133% |
| Kimberly-Clark (KMB) | 4,650 | $499,991 | $23,808 | 34% | 87% |
| PepsiCo (PEP) | 3,494 | $499,887 | $20,684 | 31% | 75% |
| Total | $67,627 | 100% |
Source: TIKR. Today’s prices; each dividend at its current yearly rate.
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Clorox is paying out more than it brings in
Clorox’s sales are growing. Net sales jumped 33% to $1.91 billion in its fiscal first quarter, ended Sept. 30, helped by the GOJO acquisition. But gross margin fell 130 basis points to 40.4% on higher commodity, manufacturing and logistics costs, and Clorox now expects adjusted EPS near the low end of its $5.70-$6.00 range for the year.
That squeeze lands on a dividend that’s already stretched. Over the twelve months to Sept. 30, Clorox paid $602 million in dividends against $453 million of free cash flow, a risky 133% cash dividend payout ratio. Dividends have topped free cash flow in three of the last five fiscal years (Clorox’s years end in June):
On its August call, management said “the current payout is a bit elevated, but we see this as something more transitory as we rebuild our gross margin and not something structural.” Analysts expect 74% in fiscal 2027, which needs free cash flow to roughly double from fiscal 2026’s $405 million. And on Jan. 5, Fabian Garcia, president of Unilever Personal Care, takes over from Linda Rendle as CEO, so the next call on the dividend is his.
Kimberly-Clark just got a lot bigger
Kimberly-Clark has raised its dividend in each of the past 54 consecutive years, and it pays $1.28 a share each quarter. Its dividend ate up 87% of free cash flow over the twelve months to Sept. 30, a tight but covered ratio. Free cash flow cleared the dividend for most of the last decade, until fiscal 2025, when $1.66 billion of dividends edged past $1.64 billion of free cash flow:
The third quarter was soft, with organic sales down 1.3% as a social media disruption hit its China diaper business. Still, cash from operations reached $2.4 billion in the first nine months of 2026, up from $1.8 billion a year earlier.
The bigger change came on Nov. 2, when Kimberly-Clark closed its roughly $48.7 billion Kenvue deal. It issued about 281.1 million new shares, each owed the same dividend, and paid about $6.7 billion in cash, funded partly by $4.9 billion of notes priced Oct. 19. So that 87% doesn’t include the bigger dividend bill or the new interest yet, and management expects mid-single-digit dilution to stand-alone EPS in 2027.
PepsiCo has the most room, and the slowest earnings
PepsiCo’s dividend took a comfortable 75% of its free cash flow over the twelve months to Sept. 16, $7.88 billion of $10.47 billion. Full fiscal years have been tighter: dividends topped free cash flow in fiscal 2022 and roughly matched it in fiscal 2025, when PepsiCo paid $7.64 billion against $7.67 billion:
What worries me is the business. On Oct. 8, PepsiCo cut its 2026 core EPS growth outlook to 2.5%-3.5%, from the low end of 5%-7%, citing rising input costs, unfavorable mix and a North America tariff refund benefit that ended after the third quarter. CEO Ramon Laguarta said on the call that “we’re not satisfied with the performance in the U.S.,” and North America CEO Ram Krishnan told employees about 1,000 jobs there are being cut, CNBC reported on Nov. 9.
Clorox’s check is the one I’d watch
Kimberly-Clark’s check is covered today, though Kenvue makes 2027 a fresh test. PepsiCo’s has the widest cushion, but with earnings growth in the low single digits, it looks safe but slow.
Clorox’s is the stretched one, so it’s the one to test. If Clorox halved its dividend, this portfolio’s income would fall to about $56,100 a year. If it stopped paying, the income would drop to about $44,500 a year, still most of the original.
The way I see it, Clorox’s dividend isn’t in trouble yet, with management calling the high payout temporary and analysts expecting coverage to recover. But I’d want to see that margin rebuild show up in the cash before I counted on the check. Garcia’s first report as CEO will show us whether he sees the dividend the same way, and Kimberly-Clark’s first quarter with Kenvue will show how far its coverage moves.
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any of the stocks mentioned. Thank you for reading, and happy investing!
