Hormel’s 6% Yield Has More Cash Support Than Kimberly-Clark’s

Hormel Foods offered a 6.0% yield in the source comparison, above Kimberly-Clark’s 5.4%. More important, Hormel’s dividend used about 82% of free cash flow over its latest twelve months, while Kimberly-Clark’s used roughly 92%.

Both companies had a warning in fiscal 2025. Dividends exceeded free cash flow at each business. The more recent figures show improvement, but neither payout has a large cushion.

Hormel’s third-quarter cash from operations rose 54% to $241 million, and the company returned $161 million to shareholders through dividends. Cash on hand reached $840 million. Management also raised fiscal 2026 adjusted EPS guidance to $1.45 to $1.51.

The weak point is demand. Third-quarter net sales fell to $2.96 billion from $3.03 billion and organic net sales declined 2%. A dividend can be covered for a period by working-capital improvement, but sustained raises ultimately require earnings and cash growth.

Kimberly-Clark’s transition adds complexity

Kimberly-Clark reported first-half cash from operations of $1.7 billion, up from $1.1 billion, and second-quarter adjusted earnings per share from continuing operations increased 10.4%. At the same time, social-media misinformation in China hurt diaper sales, and the planned Kenvue acquisition introduces integration and financing risk.

Hormel’s dividend grew faster over the prior five years and starts from the higher yield. Kimberly-Clark has a stronger recent profit trend, but its thinner cash coverage and transaction risk reduce the margin for error.

For a retiree focused on near-term income, Hormel currently offers the better combination of yield and cash coverage. The conclusion is not permanent. Hormel must prove that fiscal 2025 was a temporary cash shortfall and that weak organic sales do not become a prolonged volume problem.

The next full-year report should be judged on free cash flow after capital spending, not only adjusted earnings. Kimberly-Clark’s next proof points are cash conversion and the financing terms around Kenvue.