2 Unloved but Solid Dividend Stocks for 2018

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Kimberly-Clark (NYSE: KMB) and Genuine Parts Co. (NYSE: GPC) both had 2017s they'd rather avoid duplicating this year. But though each is battling slowing sales and industry headwinds, they offer investors valuable and consistent dividends, and have the potential to be solid income options, even if they're unloved by the broader market.

Brand power

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While not everyone will recognize this personal care company by name, it's virtually impossible not to know a number of Kimberly-Clark's brands. It's a leading manufacturer of personal care and tissue products, with megabrands such as Kleenex, Huggies, Pull-Ups, Kotex, Depends, and Cottonelle in its portfolio.

The advantage in owning consumer staples companies is that their products don't follow fashion styles or trends, and they sell fairly steadily whether the economy is on an upswing or downswing. Despite those stable and reliable sales, however, Kimberly-Clark lowered its sales growth guidance early in 2017 from 2% to 1.5% while its competitor Procter & Gamble raised its forecast to 2.5%. Kimberly-Clark's sales are now expected to end the full year flat when all is said and done.

Management understood that with sales slowing, it had to step up and deliver even more with its cost-reduction program, which has saved more than $3.3 billion over the past 13 years. The good news is that Kimberly-Clarks cost-cutting performance was actually already accelerating: It averaged $200 million annually between 2004 and 2011, but hit $435 million in 2016. These moves have helped push adjusted gross margins from 33.4% in 2012 to 36.5% through the first half of 2017. Its adjusted operating margin has similarly improved, from 14.4% during 2012 to 18.1% during the first half of 2017.

Kimberly-Clark's dividend payout history is as solid as its top-selling name-brands. The company has dished out $13.5 billion in dividends over the past 13 years, and increased its payout in 45 consecutive years. It's a top-tier dividend in its industry and the current yield is a juicy 3.2%. And it repurchased $15.4 billion worth of stock between 2004 and 2016, reducing its shares outstanding by nearly one-third.

Scale and reach

Genuine Parts Co. has its hands in a few cookie jars, but generates a little more than half of its sales from the distribution of automotive replacement parts under the NAPA brand. The remainder of sales come from its industrial replacement parts business, office products and electrical/electronic materials. But the auto parts industry experienced a slight slowdown in 2017 as two consecutive mild winters and a cooler spring and summer reduced demand for car parts. (Extreme weather is a significant factor leading to greater wear and tear on vehicles.)

However, business conditions should improve for Genuine Parts in the near term as relatively low gas prices, economic growth, and a healthy jobs market should push miles driven toward new highs. Adding to the favorable outlook for the auto parts industry: The average age of vehicles on the road is rising -- it's currently at 11.7 years -- and a large wave of vehicles is set to turn six years old, the start of vehicles' prime period for needing costly repairs.

Another side factor that should help boost the company's rebound is that more and more consumers are having repairs done for them, rather than fixing their cars themselves. That trend should continue, especially as vehicles become more complex, and the commercial (do-it-for-me) market generates roughly 75% of NAPA's sales.

While Genuine Parts won't deliver explosive growth to investors, it can leverage its brand name and massive scale to generate solid top- and bottom-line results. In fact, over the company's 89-year history, sales have increased in 84 years and profit increased in 73. Those stable gains translate into a dividend that has delivered 61 consecutive years of increases and currently yields a respectable 2.6%.

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Daniel Miller has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.