Why Kenvue Inc. ($KVUE) Could Be the Most Underrated Consumer Staple Stock of 2025
Discover the hidden gem in the consumer staples sector with a 3.90% dividend yield and iconic brands like Tylenol, Listerine, and Band-Aid
Consumer staples had a remarkable year in 2024. Household names like Colgate and Procter & Gamble reached all-time highs, but then reality struck, and many of these stocks experienced sharp corrections. Despite this, their starting dividend yields remain unimpressive, hovering around 2–2.5%. Enter Kenvue Inc. ($KVUE), a high-yielding consumer staple stock with a portfolio of trusted brands and a tempting starting dividend yield of 3.90%. Let’s explore why this spin-off of Johnson & Johnson (J&J) might be a hidden gem in today’s market.
What Is Kenvue, and Why Should You Care?
Kenvue is the consumer health division spun off from J&J. While J&J concentrates on groundbreaking pharmaceuticals, Kenvue is all about the everyday essentials we’ve come to rely on—think Tylenol, Neutrogena, Listerine, and Band-Aid. With over 1.2 billion people using its products daily, Kenvue’s brand recognition is unparalleled.
Although the stock had a strong run last year, it’s down 14.06% since December 2, 2024. That decline, coupled with its generous 3.90% dividend yield, makes it an attractive candidate for value-conscious investors.
Breaking Down the Numbers: Is Kenvue a Bargain?
Let’s get into the nitty-gritty. At the time of writing:
Starting Dividend Yield: 3.90%
Price-to-Earnings (P/E) Ratio: 18.40
These figures stand out when compared to sector heavyweights:
Kenvue not only offers a higher starting yield but also trades at a significantly lower valuation.
The Dividend Story: Can Kenvue Keep It Up?
Kenvue raised its dividend by 2.5% in July 2024. While this may not scream “Dividend Aristocrat in the making,” it’s consistent with similar moves by Colgate. For context, Colgate’s recent dividend hike also came in at around 2.5%, yet it offers a much lower starting yield.
The upcoming quarterly dividend of $0.205 per share, payable on February 26, 2025, is another indicator of Kenvue’s commitment to rewarding shareholders. For investors seeking a steady income stream, this is a promising sign.
How Big Is Kenvue Compared to Its Peers?
Kenvue’s market cap stands at $40.32 billion, which places it firmly in the big leagues of consumer staples:
Interestingly, Kenvue’s valuation is smaller than Colgate’s but larger than Clorox’s, all while offering a higher dividend yield. This sweet spot between size, stability, and value is one reason Kenvue deserves a closer look.
Why the Spin-Off Matters
Spin-offs can be tricky investments. They often lack the historical data investors rely on to assess long-term performance. However, they also offer opportunities, as they’re frequently undervalued due to market skepticism.
Kenvue has quickly established itself as a major player in the consumer health space. By separating from J&J, it now has the autonomy to focus on its core competencies and capitalize on growth opportunities—a classic case of the sum being greater than its parts.
Growth Potential: Beyond the Dividend
Kenvue’s iconic brands are household staples, giving it a reliable revenue stream. But the company isn’t resting on its laurels. Innovations in product formulations, eco-friendly packaging, and an expanding global footprint provide avenues for future growth.
Moreover, Kenvue’s lower valuation and higher yield compared to its peers could attract dividend-focused investors, driving up demand for the stock.
Risks to Consider
No investment is without risk. Here are a few potential pitfalls:
Lack of Historical Data: As a recent spin-off, Kenvue’s standalone performance is still unproven.
Competition: Heavyweights like Colgate and P&G dominate the consumer staples sector, which could limit Kenvue’s market share.
Economic Downturns: While consumer staples are typically recession-proof, prolonged economic challenges could impact sales and profitability.
Why Kenvue Stands Out
Despite these risks, Kenvue’s combination of trusted brands, attractive valuation, and a robust dividend yield make it a compelling investment option. In a sector where many stocks are priced for perfection, Kenvue offers a rare blend of value and income.
Final Thoughts: Is Kenvue Worth Adding to Your Portfolio?
If you’re hunting for a high-yield, undervalued consumer staple stock, Kenvue deserves a spot on your radar. Its 3.90% starting dividend yield, iconic brand portfolio, and favorable valuation relative to peers make it an intriguing choice for income-focused investors.
While Kenvue may not yet have the pedigree of a Dividend Aristocrat, its strong fundamentals and growth potential suggest it could be a rewarding long-term investment.
Disclaimer
This article is for educational and entertainment purposes only. It is not financial advice. Always conduct your own research before making any investment decisions.