Consumer staples are far from sexy; they’re the basic household and personal care products that we use day in and day out. But the makers of these goods generate steady and reliable dividend streams, making them an income investor’s bread and butter.–The Editors

Kimberly-Clark Corp (NYSE: KMB) is a leading global manufacturer of health and hygiene products such as Kleenex facial tissue, Scott bathroom tissue, Huggies diapers and a variety of feminine hygiene products. The firm also produces a multitude of paper products for institutional use including the paper towels and bathroom tissue you’ll find in office restrooms. The products may be mundane, but there’s nothing ordinary about the $19 billion the firm booked in revenue last year.

Given that most of Kimberly-Clark’s portfolio is made up of paper products, rising prices for wood pulp can squeeze margins. As a result, the company engages in an active hedging scheme to mitigate the effects of rising prices. The company also implemented an aggressive cost reduction program that saved the company approximately $240 million in 2009 and $200 million in 2010. Cost savings for 2011 are expected to be in line with those past results, offering the potential to expand margins.

Kimberly-Clark has aggressively expanded its health care offerings with products such as catheters, tubing and InteguSeal Microbial Sealant, a film-forming liquid applied to the skin prior to surgical procedures that prevents microbes from infecting surgical sites. The company has made a number of strategic acquisitions in the health care field at attractive valuations. Notable acquisitions include I-Flow Corp, which develops and markets drug delivery systems, and Baylis Medical, which develops and markets pain management, cardiology and radiology products. Those product lines offer greater growth potential than consumer staples and tend to carry higher margins because they’re less affected by commodity prices.

Kimberly-Clark has diligently reduced its liabilities in recent years, paying down both short-term and long-term debt. The company also boasts a shareholder-friendly track record, regularly returning cash to shareholders in both dividends and share buybacks. With a 66 cent quarterly dividend, at current prices Kimberly-Clark yields around 4.3 percent.

Although Kimberly-Clark is more of an income play than a traditional growth story, the company does have an attractive opportunity to expand its sales base. Developed markets have become saturated for paper product producers. But consumers in emerging markets have increased their consumption of facial tissue and toilet paper. In the third quarter approximately 45 percent of the firm’s sales were generated outside of the US, notably in countries such as Brazil, China and India. Kimberly-Clark’s sales growth won’t set the world on fire, but emerging markets will continue to pad results.

Kimberly-Clark shares don’t trade at bargain-basement levels, but neither are they overpriced. Currently trading at a price-to-earnings multiple of 13.5 based on trailing 12-month earnings, the share valuation seems fair when one accounts for the expected 8 percent earnings growth over the next five years and almost 8 percent dividend growth.

–Benjamin Shepherd