Meet the 3.6%-Yielding Dividend King Stock That's Up 25% in 3 Months

Kenvue (KVUE), the newly spun-off consumer health giant, has been making waves in the stock market with a remarkable 25.7% increase in its share price over the past three months. This impressive performance is driven by a combination of factors, including strong earnings guidance, a robust dividend history, and the influence of an activist investor.

Kenvue, which operates popular brands such as Band-Aid, Tylenol, and Neutrogena, is guiding for earnings per share (EPS) of $1.10 to $1.20 in 2024, along with organic sales growth of 2% to 4%. This midpoint target would give the company a price-to-earnings (P/E) ratio of 20, which is not excessively high, considering its stable and low-growth nature. Kenvue's dividend history is equally impressive, with a forward yield of 3.6% following a 2.5% increase in July 2023. This raise maintained Kenvue's status as a Dividend King, having paid and raised dividends for at least 50 consecutive years.


The recent stock price surge can be attributed to a few key factors. First, Kenvue's earnings report and guidance reset investor expectations, leading to a rebound in its share price. Second, and perhaps more significantly, the involvement of activist investor Starboard Value has sparked interest in the company. Starboard took a significant stake in Kenvue, which typically signals a desire for strategic changes to accelerate growth. While it's unclear what specific actions Starboard has in mind, the mere presence of an activist investor can drive short-term stock price increases.


In terms of valuation, Kenvue is not particularly cheap, with a P/E ratio of around 20. However, its dividend yield of 3.6% is quite attractive, especially when compared to other Dividend Kings. For instance, Altria Group (MO) offers the highest yield among Dividend Kings at 8.17%, followed by Universal (UVV) and Northwest Natural Holding (NWN). Kenvue's valuation is also in line with its historical averages and industry peers, making it an appealing option for risk-averse investors seeking passive income.

Looking ahead, Kenvue's long-term growth prospects depend on its ability to maintain mid-single-digit growth and support future dividend raises. The company's strong brand lineup and stable earnings make it well-suited for dividend-focused investors. However, some investors may prefer to see meaningful sales volume growth before considering the stock.

In conclusion, Kenvue's recent stock price increase is driven by a combination of strong earnings guidance, a robust dividend history, and the influence of an activist investor. While the company's valuation is not excessively cheap, its attractive dividend yield and stable earnings make it an appealing option for risk-averse investors seeking passive income. As Kenvue continues to execute on its growth strategy, it remains a solid choice for dividend-focused investors.