Is Kenvue (KVUE) a Halal Dividend Stock Worth Adding to Your Portfolio?
99min read
Aime SummaryFor income-focused Muslim investors, the intersection of financial performance and ethical investing is a delicate balancing act.
Inc. (KVUE), the consumer health giant spun off from in 2023, has emerged as a compelling case study in this space. With a 3.7% dividend yield, a robust portfolio of household brands, and recent certification as Shariah-compliant, the stock appears to tick many boxes for halal investors. But is it truly a long-term addition to a diversified portfolio?Shariah Compliance: A Green Light, But Not Without Nuance
Kenvue's certification as Shariah-compliant by the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) is a critical factor for Muslim investors. AAOIFI's standards are among the most respected in the industry, and Kenvue's compliance is reviewed quarterly to ensure adherence to Islamic principles. The company reported $15.46 billion in revenue for fiscal 2024, with no interest income disclosed—a major positive given the prohibition of riba (interest) in Islamic finance.
However, compliance is not static. Impermissible revenue (e.g., from alcohol, gambling, or pork-related products) must remain below 5% of total revenue for a stock to retain its halal status. While Kenvue's current financials suggest this threshold is met, investors should monitor its compliance status through tools like the Zoya app, which provides real-time alerts and detailed breakdowns. Additionally, shareholders must consider Zakat obligations. If an investor's Kenvue holdings meet the Nisab threshold (approximately $3,800 in gold equivalent), they must pay Zakat on the asset's value. Zoya's free Zakat calculator simplifies this process by linking to brokerage accounts.
Dividend Sustainability: A Double-Edged Sword
Kenvue's current dividend yield of 3.71% (as of July 2025) outperforms the Consumer Defensive sector average, making it a top pick for income seekers. The company has maintained quarterly dividends since 2023, with the most recent payout of $0.205 per share on May 14, 2025. However, the 146.4% payout ratio—far above the sector average of 58%—raises red flags. This metric suggests that Kenvue is distributing more in dividends than it earns, leaving little room for reinvestment in growth or to weather economic downturns.
Historical data underscores the risk. Earnings per share (EPS) have declined by 23% over three years, while free cash flow dropped by 50% in 2024 to $1.33 billion. Analysts project a modest recovery, with EPS growth of 7% CAGR over the next five years, but this remains unproven. For conservative investors, the high payout ratio implies the dividend is vulnerable to cuts or reductions, especially if Kenvue's earnings falter further.
Long-Term Growth: A Portfolio in Transition
Kenvue's core strength lies in its blue-chip brand portfolio, including Tylenol, Listerine, and Aveeno. These brands dominate their categories, with Tylenol alone capturing 70% of the U.S. over-the-counter pain reliever market. The company is also investing in innovation, such as micro-peptide formulations in Neutrogena's skincare line, to drive long-term growth.
Yet, the company faces headwinds. Q2 2025 results revealed a 4% decline in net sales, driven by tariffs, currency fluctuations, and inventory destocking at retailers. To address this, Kenvue has initiated a strategic review, including potential divestitures of non-core assets like parts of its Skin Health and Beauty portfolio. While this could streamline operations, it also introduces uncertainty about future revenue streams.
The leadership transition—from CEO Thibaut Mongon to interim CEO Kirk Perry—adds another layer of complexity. Perry's background in data-driven marketing and operational restructuring could stabilize the business, but execution risks remain. Analysts are cautiously optimistic, projecting 3.6% revenue CAGR through 2029, but this hinges on successful cost optimization and portfolio rationalization.
The Verdict: A High-Yield Bet with Caveats
Kenvue's halal status and high dividend yield make it an attractive option for Muslim investors seeking income. However, the unsustainable payout ratio and volatile earnings demand a cautious approach. For risk-tolerant investors comfortable with short-term volatility, Kenvue could offer a compelling entry point if the company executes its strategic initiatives successfully.
Conversely, conservative investors may prefer to wait for clearer signs of earnings stabilization or a lower payout ratio. The stock's future hinges on Kenvue's ability to balance dividend commitments with reinvestment in growth and operational efficiency. Regular monitoring of compliance status and financial metrics will be essential.
In the end, Kenvue is a high-reward, high-risk proposition. For those who align with its ethical framework and are prepared to navigate its uncertainties, it could enrich a diversified halal portfolio. But for others, the risks may outweigh the appeal of its dividend.
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