Looking For A High-yield Alternative To Costco Wholesale …
By Daniel Foelber – Apr 15, 2026 at 1:15PM EST
Key Points
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Costco and Walmart are compelling values for their customers, but not for new investors.
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Consumer products maker Kimberly-Clark’s strategic pivot could pay off over the long run.
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Plus, investors can buy the stock at a dirt cheap valuation and collect a sizable dividend.
Investors looking for a consumer staples giant at a far better value and a significantly higher yield may want to take a closer look at Dividend KingKimberly-Clark (KMB 0.54%), which boasts a 5.3% yield and has increased its payout for 54 consecutive years.
Image source: Getty Images.
Major competitive advantages for Costco and Walmart
Consumer spending pressures and higher cost of living are impacting the consumer staples and discretionary sectors. But Walmart and Costco are two of the best-positioned companies because they pass along value to customers. Both companies convert around just four cents of every dollar in sales into operating income — so customers really are getting a good deal. And it works in Walmart’s and Costco’s favor because of their high sales volume — with a staggering $713 billion in trailing-12-month sales for Walmart and $286 billion for Costco.
Walmart’s and Costco’s elite supply chains and marketing give them negotiating power with manufacturers and support the build-out of their private-label offerings under brands Great Value for Walmart, Member’s Mark for Walmart-owned Sam’s Club, and Kirkland Signature for Costco. Private-label products give these retailers a lot of control over what’s on shelves.
For example, in January, Sam’s Club announced that 100% of Member’s Mark food and beverage products are now made without more than 40 unwanted ingredients or synthetic colors, demonstrating just how quickly Walmart can adapt to shifting consumer preferences and the growing number of health-conscious customers.
Kimberly-Clark is shifting toward a higher-margin strategy
Manufacturers Kimberly-Clark are challenged by the longer-term trend toward private-label brands — which can be especially effective in product categories where consumers don’t place as much of a premium on brands, such as everyday household products.
Kimberly-Clark is a paper product specialist — with leading brands across paper towels, toilet paper, tissues, diapers, feminine care, and adult care. Demand for these products holds up well no matter what the economy is doing, but they are also historically lower-margin product categories under pressure from private labels and consumer spending.
Kimberly-Clark realizes it can’t sit idly by and wait for a cyclical recovery in consumer spending. So it’s taking action through the planned acquisition of Kenvue, announced in November 2025 and planned to close in the second half of 2026. Kenvue will make Kimberly-Clark a household and personal care powerhouse by adding brands Band-Aid, Tylenol, Listerine, Aveeno, and Neutrogena to its portfolio.
One glance at Kimberly-Clark’s sales and margins, and it looks the company’s performance is rapidly deteriorating. But the results aren’t as bad as they seem.
In its fourth-quarter 2025 earnings release, Kimberly-Clark noted that its organic net sales growth would have been positive had it not been for its exit from its private-label diaper business. The company had been phasing out its long-standing partnership with Costco, where Kimberly-Clark provided a lower-cost version of Huggies sold under the Kirkland Signature brand.
Making a lower-cost version of Huggies for private-label retailers gives Kimberly-Clark higher revenue, but private-label sales are often low margin and somewhat compete with its core Huggies brand. Or put another way, Kimberly-Clark still lands the sale if a Costco customer buys Kirkland diapers made by Kimberly-Clark, but it’s a much lower value sale than if a customer were buying diapers under the core Huggies brand instead.
Kimberly-Clark’s exit from the private-label diaper business, as well as its Kenvue acquisition, marks a major step change for Kimberly-Clark that could lead to higher margins. And it’s precisely the kind of move that should chart a path toward higher free cash flow and a growing dividend.
Expand
NASDAQ: KMB
Kimberly-Clark
Today’s Change
(-0.54%) $-0.52
Current Price
$96.64
Key Data Points
Market Cap
$32B
Day’s Range
$95.90 – $97.22
52wk Range
$92.42 – $144.31
Volume
57K
Avg Vol
5.7M
Gross Margin
35.67%
Dividend Yield
5.21%
A better buy for value investors
Costco and Walmart are phenomenal businesses. But their s are overpriced given their moderately high single-digit to low double-digit earnings growth rates. And they aren’t good stocks for passive-income investors, given their low yields.
Kimberly-Clark presents a far better opportunity. Moving away from private-label diapers and building out its brands through the Kenvue acquisition should unlock efficiency gains from synergies. And since Kimberly-Clark trades at just 12.8 times forward earnings, investors are already pricing in poor results.
Kimberly-Clark is a top buy for value investors who believe the sell-off has gone too far, that the competition from private-label brands is already priced in, and that the company will successfully integrate Kenvue’s brands.
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About the Author
Daniel Foelber is a contributing Motley Fool stock market analyst with extensive experience covering the broader stock market and publicly traded companies across energy, industrials, utilities, materials, technology, communications, consumer discretionary, consumer staples, and financial stocks. Daniel looks for industry leaders offering compelling growth, value, or dividends to generate passive income. He has also written for energy trade publications and helped build oil and gas training modules. He holds a bachelor’s degree in finance and a certificate in personal financial planning from the University of Houston. He believes the best investors are those who focus on fundamentals, remain steady through volatility, and filter out market noise.
Stocks Mentioned
Kimberly-Clark
NASDAQ: KMB
$96.67
(-0.50%)-$0.49
Walmart
NASDAQ: WMT
$124.70
(-0.28%)-$0.35
Costco Wholesale
NASDAQ: COST
$983.32
(+0.87%)+$8.52
*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.
Sumber Artikel:
Fool.com