No Revenue Growth, No Dividend Growth

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Consumer staples look reliable with strong brands, steady cash flow, and good yields. But dividends can’t outrun revenue forever, and across this sector the growth engine has stalled.

In this episode, Greg begins with a quick recap of how 2025 has unfolded so far, highlighting strong income growth for the model portfolio, a handful of growth names driving market performance, and value strategies continuing to lag. From that backdrop, he digs into the disconnect between the appearance of safety in consumer staples and the underlying fundamentals that truly support dividend growth. 

Using Kimberly-Clark ($KMB), General Mills ($GIS), Colgate ($CL), Procter & Gamble ($PG), and Church & Dwight ($CHD) as case studies, Greg shows how companies with high ROIC and defensive business models can still become no-growth traps. These companies were once consistent outperformers with impressive dividend histories, but the economy evolves and so have their growth profiles.

Topics Covered:

03:05 – Comparing dividend growth to the S&P 500

05:43 – Investing styles cycle and chasing rarely works

07:07 – Surface numbers can be misleading

11:00 – Kimberly-Clark: attractive metrics masking zero growth

16:42 – General Mills: high yield but barely growing

18:36 – Colgate: excellent margins, slow dividend progression

19:58 – Procter & Gamble: financial strength, but limited growth

21:03 – Church & Dwight: a past outlier that doesn’t meet our targets

23:57 – Kimberly-Clark’s planned Kenvue acquisition

29:36 – The mosaic of evidence investors should pay attention to

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Disclaimer: Past performance does not guarantee future results. Every investor should consider whether an investment strategy is right for them and all the risks involved. Stocks, including dividend stocks, are volatile and can lose money. Denewiler Capital Management may or may not have positions in the publicly traded companies mentioned herein.

Transcript

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[00:00:11] Greg Denewiler: This is Greg Denewiler, and you are listening to another episode of The Dividend Mailbox — a monthly podcast about dividend growth. Our goal is to stuff your mailbox full of dividend checks, and when they grow over time, a funny thing happens: you create wealth.

Welcome to episode 53 of The Dividend Mailbox. We're into the first week of November, and now's a great time to look and see how the year's playing out. There aren't too many surprises. Growth continues to be in the spotlight — value, not so much — but when things get a bit challenging, it is very important to remind yourself of what you're trying to achieve.

So we'll start there, and then that will set us up for… we're going to take a look at some consumer staple stocks. In the past, these companies have performed well and have been good dividend growers. This sector can have attractive dividends, but we want dividend growth — and we're going to take a look at them to see if the numbers on the surface tell the whole story.

The first thing we're going to do is look at kind of a recap of what's been going on year to date. The first observation is the interesting thing about dividend growth: on one hand, we have an extremely high level of confidence how the year is going to end on the income side of our portfolio — for our model portfolio, which doesn't have any index funds, because we designed it to really just track our core strategy.

Our income will be up about 8%, and the odds of that changing much are pretty slim, because there's only about — I don't know — eight of the companies left to pay one dividend. None of them, I would wager, are going to cut. We should get the dividend they're paying now, and then we've got a little bit of money market interest we're going to earn. We can't get it down to the exact dollar, but we can get it pretty close — and we're up 8%.

When you compare that to the S&P 500 dividend year-to-date, it's up about 5%. That will probably be around six to seven when we get to the end of the year. So from the standpoint of dividend growth, we are having a good year. We're beating what the S&P 500 is growing its dividend at.

However — there’s a little bit of a “however” here. We track the income side very closely, but that is what nobody pays much attention to. Of course, what everybody pays attention to is: the S&P 500 is up on a total return basis through the end of October. It’s up 17.5% — actually, in the last few days, the darling growth stocks have kind of hit a wall at the moment. Who knows how the year finishes, but year-to-date, the S&P 500 is up 17%.

And I’m just going to give you three other numbers, because this really says it all, without saying what is so obvious — and you hear it constantly: the S&P 500 Top 50 is up 20.8%. That has the usual suspects in it. Of course, what dominates that is the top seven.

When you start to get more diversified, you get down to the equal-weight index on the S&P 500 — which is exactly what it says, weights everything equally — it’s up 8.8%. So the broader market hasn’t been near as strong, but I think most people sort of get that or already know that.

Of course, when growth is doing well, value tends to not do so well. And dividend investing — to some varying degree — you fall into the value camp. When you get down to the world we live in, one of the indexes that S&P Global follows is the Dividend Aristocrats Index — it’s up 4%. Not quite so appealing there.

Along those lines, the S&P 500 Low Volatility High Dividend Fund — you know, the one you're supposed to be able to make money in with no risk? Well, guess what? Year-to-date, it’s up 1.3%. For the month of October, it was down 4%. So… so much for low volatility and so much for high dividend.

But I will be the first to admit: all these styles ebb and flow. They tend to quasi-revert to the mean of their long-term performance. If you go back a couple of years, the dividend space was just screaming — the market had been hit hard and it was down more than 15%. Actually, our model portfolio at the time was up. And I've made several statements that these things just ebb and flow — and all of the flow has been in growth, and all of the ebbing right now is coming from more traditional — I call it the old economy companies that make stuff you use every day.

Nobody seems to care a whole lot right now, but one could argue: well, there’s maybe more value there right now. That's part of a great lead-in to where we're going to go. Looking at these numbers just as they appear never tells the whole story. When the numbers appear attractive, they can also be misleading.

Growth has been very attractive this year. It's tempting to switch horses and chase those returns — but growth at any price comes with its own risk. Switching strategies to whatever seems to be working at the moment usually doesn't work so well. On the other side, buying a company just because it has a good dividend yield or it looks cheap doesn’t always work so well either.

That's where we're going to go next. What I'm going to do today is get into looking at some of these companies that have done really well in the past — and are not doing well now. And this really came up from a conversation that I had with a friend of mine who asked me about a company. He asked me, “Well, what do you think of Kimberly-Clark?”

And I go — well, we've looked at it, because it's one of these long-term dividend growers, and it’s got a good yield, a lot of brands, a consistent business. I looked at it — and a couple of days later, I got back to him and said, “Do you realize this company has not grown revenue in 10 years?”

Well — what you're going to see — I mean, that’s not uncommon in this space right now. Ultimately, you have to have earnings growth to have dividend growth. Now, you can buy a high dividend payer. There's nothing wrong with that — if you think that dividend is sustainable, and if you've got a 5% yield, 6% yield, and they're not growing it, you're going to get compounding off of that just from reinvestment because of the strong cash flow.

But the trick there is: will they be able to sustain it long-term? Because usually it just implies either higher debt or a business that’s maybe semi in decline — or, you know, it's very mature. Point is — you really have to look behind it and see what's going on, which is back to where we're going to try to go with this episode.

We're going to just do a quick overview of Kimberly-Clark, Church & Dwight, Procter & Gamble, Colgate, and General Mills. These are basically consumer staples. I'm not going to go into a bunch of statistics, because I know it’s impossible to follow when you’re just listening. These are your steadier, mature names — and historically have been fairly predictable.

And with the high valuations in the market, some of them seem to be potentially appealing options. Well, not everything in this space is quite what it seems. If you look at the total return charts, going back 20 years or more — all the way up until three or four years ago — virtually all of these companies were beating the S&P 500. They have been very good performers in the past.

The last several years, they've lagged — varying degrees of extremely poor performance. You've got dividend yields now that, on half of these things, are 4% or more. General Mills is 5.2%. Kimberly-Clark is 4.2%. Procter & Gamble's 2.8%. And also Church & Dwight is 1.35% — the lowest yielding of them all.

But just an interesting observation here: Church & Dwight and Procter & Gamble are the two best performers of the group — by quite a bit.

So first dilemma — this is kind of holding true across the market, and I hope that’s part of what you get out of this podcast: you have to really look at what you own and why you own it. And just looking at the past numbers may not tell you the story that you really want to know.

Also, before we get into these companies — we're just going to take a look at them from a high level. There very well could be catalysts in here for them, but we aren’t going to go that far.

So back to my point here: I was asked about Kimberly-Clark. The stock is down and it's got a 4% dividend yield. Is this something you're looking at?

Well, here’s the thing: some of the numbers just off the top actually would make you think that maybe this is a good buy and hold. If you're getting over 4%, then — at the end of 10 years, without any compounding at all — you’ve got 42% of your money back.

Kimberly-Clark trades at a 16-times forward multiple P/E ratio. That actually is cheap, especially for this group that has traded much more expensive in the past, because they were good low-volatility, long-term holds. But that’s actually cheaper than the market now.

You know, one of the numbers that we look at is return on invested capital, because a company has to earn more than their cost of capital long-term to generate shareholder wealth. Well, the rough minimum we like to see is 10% annualized — because that's basically the market return — and then debt's a little less than that, so usually they have some combination.

For Kimberly-Clark, return on invested capital is 26%, and the 10-year average is 22%. So it's actually holding up — or actually up a little bit. Their debt-to-equity is 5.7 — that’s a little high, but you know, you have to put debt into perspective. Number one: what the schedule of it is — how diversified is it as far as maturity dates. That number I don't have, because I'm not going into a bunch of detail on these — it’s just overall picture.

Number two: debt is always relative to earnings power. Here's the thing that makes you not worry about it too much — their times-interest-earned is 10, meaning they earn ten dollars for every dollar of interest that they have to pay. When you own diapers and toilet paper and things like that — I mean, you know, the stuff’s not going to disappear tomorrow. So there is some consistency here. The debt is probably not an issue, but something you want to keep in the back of your mind — because if things go bad, debt’s what kills you.

So it's a profitable company. Debt’s extremely manageable. Great yield. Relatively good valuation.

And then I'm going to go back to — okay, so: from 2005 to 2015, the dividend is up 105%. Well, you've got a double of your income over 10 years, which is 7.2% — a little better than the S&P 500 — and you've got a stock that right now is trading cheaper than the market. If you look at those numbers right there, you'd say — why not take a stab at that 4.2%? Which, hence, is where the question originally came from.

Well — if you look at 2015 to 2025 — the last 10 years — dividend’s up 43%. Dividend growth is slowing down. And here's the first problem that you start to look at: you can't get dividend growth indefinitely if you don't have revenue growth. Last 10 years, dividend growth is up 43%. Red flag. Revenue growth in the last 10 years is minus 3.6%.

So they are struggling to grow revenue. Now here's an interesting fact: even though the P/E has declined and revenue growth has been negative, you have a 10-year total return for the stock of 42%. A substantial piece of that has come from the dividend, and the stock is up a little bit.

So you may ask: how does that happen when they’re not growing revenue? Here's part of the answer — and all of these fall into this category to varying degrees: Kimberly-Clark, in the last 10 years, has bought back 8% of their stock. Even if everything stays flat, earnings will go up a little bit just because there are 8% fewer shares out there. And that also helps the dividend a little bit.

Now — you know, we're after dividend growth at the moment. If there isn't a clear path forward — let alone how we're going to get the 7% annual that we target — it gets tough.

So we're going to take a look at some of the other consumer staples, to kind of see a representation of the group.

But one of the problems is — when you have a mature company that's generating good cash flow, there is a temptation by management to go out and buy growth. That's what most companies end up doing. And we are going to come back to Kimberly-Clark — but we’ll come back to that in a little bit.

When you look at the rest of the sector — Church & Dwight, Procter & Gamble, Colgate, and General Mills — all sort of same type of business — you've got all these companies that trade either at or below the market based on their forward P/Es.

The worst performer of my group is General Mills. Total return for the stock for the last 10 years has been 15%. But if you look at their P/E right now, it's down to 12. So it’s gotten pretty cheap — and it's got a 5.2% yield. It’s got times-interest-earned of six. Their debt-to-equity is 1.5 — so they don't have near as much debt as Kimberly-Clark does. Their times-interest-earned is a little less — but I can tell you that six is still a good number.

When you look at their return on invested capital, it's 12% — it’s averaged 12% for the last 10 years. Roughly, in the last 10 years, they've bought back about 10% of their stock. So the company is profitable — it technically earns more than their cost of capital — so over time, you would think, well, I should do relatively well on this thing.

If you go back 20 years — dividend growth has been 270%. So this thing, in the past, has been a really strong dividend performer. But in the last 10 years, the dividend growth has only been 38%. And over the last decade, revenue growth has only been 11%. Eleven percent over a 10-year period is barely more than 1% a year. So without any significant growth, eventually they hit the end of the road. Again — the stock return for the last 10 years has been 15%. It’s really struggled here recently. Do you really want a 5.2% yield and not get a whole lot of return?

You can kind of start to see the picture here with these companies.

So if we move on to Colgate — it's actually got a little bit lower yield. It's got a 2.6% dividend. Thirty-three percent return on invested capital — that’s what they've averaged for the last 10 years. That's a really strong number. They've got debt out there, but their times-interest-earned ratio is 17 — they earn 17 dollars for every dollar of interest they owe — which is an extremely strong number.

The P/E is 21 — basically roughly where the market is. This one actually is one of the better ones. Revenue growth has been 20% in the last 10 years. So that gives that one a little bit more flexibility. But again — these things are struggling to grow. When you look at dividend growth in the last 20 years, it’s been 162%. In the last 10 years — it drops down to only 37%. That's not anywhere close to 7% a year. And with the yield only at 2.6% — those numbers just don’t reconcile.

In the last 10 years, total return on it has been 47%. When you've got the S&P doing half of that in nine months — it doesn't get you too excited.

Another one that follows the same sort of position is Procter & Gamble. It has a 2.8% yield. It's got a forward P/E of about 22. It’s only got 0.6 times debt-to-equity. Times-interest-earned is 19. Financially, it's extremely strong. Return on invested capital is down at 18% — still very profitable — meets our 10% threshold. It has the second-best performance of the group — up 63% in the last 10 years on a total return basis — and they've bought back 13% of their stock. That is a positive.

But — the last 10 years — dividend growth has only been 59%. The 10 years before that, dividend growth was 137%. Again — same deal here. Its 10-year revenue growth is only 9.6%.

Finally, we'll hit Church & Dwight briefly. This is the one in the group that is a little bit of an outlier. They own the Armor All brand, and other things in the household sector. This one actually has been one of the better performers.

When you look at Church & Dwight — the dividend yield’s 1.35%. So we prefer to have dividend yields that start higher than the S&P 500 — or else, on one level, why not just buy that? But it’s the one that’s had the best dividend growth. Part of that’s because it started at a very low dividend — so it’s easy to grow it if it starts extremely low.

The past 10-year dividend growth has been 75%, which is the closest to our goal of a double in 10 years. If you go to the decade before that, the dividend growth was 1,020%. Like I said, it’s much easier to grow the dividend when you're starting with a really small yield.

Even still, this number has dropped off for them. They've got 11 times-interest-earned — so good shape there. Here's where this gets kind of fascinating — when you actually look at companies and how they generate returns: the return on invested capital — it's the lowest one of the group. 7.7%. Last 10 years, it's averaged about 12%. Right there, you would maybe step back and say, “Hmm — how in the world? They’re not that profitable.” But Church & Dwight’s total stock return has been 125% in the last 10 years. Part of the reason why Church & Dwight has done better is because their revenue growth is 76% in the last 10 years. Well, part of that's been through acquisitions — but to their credit, when they go out and buy something, they seem to be able to maintain the profitability of the business and not dilute it. So that’s a plus.

P/E going forward — well, because you've got more growth, you've got a higher P/E usually — and that's the case here. It trades at 25 times next year’s estimates. You tie all this together, and what you have is: a lot of companies in this space are financially strong, fairly profitable, you've got good dividend yields — but dividend growth rates are slowing down. Somehow, they’ve have to figure out a way to grow revenue, or the dividend growth is just not going to be there.

We’ve stated before that if you have a higher yield, you don't need as much dividend growth. But the slowdown has also shown through in total return as well. And one of the things you really have to be careful with is: mature companies generate excellent free cash flow. So it gives them options — and sometimes, that can be the worst thing they can have — are options. Because they go out and they exercise one of them, meaning they spend money.

Where I'm going back to is Kimberly-Clark. They just announced a couple of days ago that they are going to buy Kenvue. Kenvue was spun out of Johnson & Johnson a couple of years ago. Kenvue happens to own Tylenol, Listerine, Band-Aids — a lot of other well-known products. Clearly, they’re trying to find a catalyst for growth, because as I mentioned, revenue growth — it’s the worst one on the list. They've actually had negative revenue growth in the last 10 years. But the company is profitable — it's the second-highest return on invested capital.

So they're taking their money — they’ve got debt capacity — and they're going to try to go out and buy growth. Well, I find this kind of fascinating, because Kenvue — their revenue when they were spun out in September of 2022 was 14.9 billion. Their revenue today, based on the last quarter, was 15.1 billion. Now, I know it’s only a three-year period — but still, to me, 200 million on 15 billion is not really growth.

Earnings in December 2022 were $1.09. Right now — as of June — they were $0.99. Nothing happening there. Pre-tax income — in June of 2022, it was 2 billion. In September of 2025, you had 1.9 billion. So actually, profitability has declined some.

So one would kind of wonder — Johnson & Johnson spun it out because they didn’t see a whole lot of growth there. Kimberly-Clark is a no-growth company — a very low-growth company — and they’re buying another no-growth, very low-growth company. They think they're going to be able to cut $2 billion of expenses out of the combined merger. It's one of those deals where, if you just look at the history of mergers — and this is well documented — most of them don't add value to shareholders. I don't know — they think there’s a catalyst there, but just as a casual observer, I have no idea where it’s going to come from.

The only thing that seems to really make sense is that they’re trying to take advantage of a depressed stock price because of Tylenol. Well, I mean — I’m going to tell you — Tylenol does a lot of good, but there’s some information out there that ties it to some health problems, and everybody wants to sue them. You have to wonder though — I mean, these lawsuits can get really expensive, and they can go on and on.

It seems kind of odd — and on top of that, Kimberly-Clark is going to spend $48 billion to buy them. As I mentioned — pre-tax income, trailing 12 months, they’ve got $2 billion. That’s a 5% return. Those are not numbers that are going to move very many needles.

So what's the takeaway on these consumer staples? What you potentially will have is: these companies are going to go out and do acquisitions, trying to buy growth. That is just almost always what happens. That’s the thing to really pay attention to. It usually doesn’t help shareholder value — it usually hurts it.

In the past, they've been great performers. Most of them, up until three or four years ago, had beat the S&P 500 on a total return basis. But all those numbers are changing now — and they’re all slowing down.

The thing to really think about is: most of these companies have great return on invested capital. Okay — why are these companies not performing better, when they have such great returns? This is really where you start to step back and understand how a company creates wealth. You can have a great brand that’s very profitable, that’s mature — but they can’t do anything with it. Some of them have done better than others at maintaining that brand power — but it is becoming a bigger issue.

They're not going to go away — but what do you pay for them? And do you get the growth you want? Is dividend growth sustainable — and at what level are they going to be able to grow it? Which is always what we go back to. It’s just a key concept. There’s nothing wrong with buying a higher yield — but then again, you have to make sure that even that yield is sustainable.

So as we start to wrap up here — that kind of brought up a recent memo that just came out from Howard Marks. I don't agree with everything he says — but the guy's made a lot of money, been around for a long time, and he's seen a lot in the high-yield markets where credit risk is one of the core fundamentals of what they try to look at… to make sure when they're buying higher-yield debt that it is sustainable. It's kind of semi back to what we do anyway.

He wrote a memo about — there are some cracks that are starting to show up now, and when the cracks appear, the market changes fast. I would like to read one quote that he made, because there have been a few high-level bankruptcies here just recently. One of them was from an auto parts company. There was fraud involved, but there were some red flags that were coming up. And he says:

“In investment research, conclusions usually aren’t compellingly obvious, but instead built up from inferences and probabilities. It’s not a matter of one decisive discovery at an ‘aha’ moment, but rather the assembly of individual snippets of information into a mosaic that leans toward a conclusion based on what in law is called a preponderance of the evidence.”

So for me — you know, the evidence on these — Kimberly-Clark, Colgate — very profitable businesses, good dividend yields — but you need to go behind that to see: okay, how are these companies going to develop going forward? And some of the numbers are telling you that problems are potentially starting to emerge.

And in this environment — you're either paying too much for the growth, or the growth’s not there. The yield is — but that’s probably not what you want. So this is the time you have to really start to be careful. And you may… you know, Berkshire Hathaway just announced they had about $380 billion of cash, if I remember right. They had record earnings. I mean — the company as a whole is doing well. But you don't have to have all your money invested all the time.

It is challenging out there, because growth has sucked all the air out of the room. But trying to force an idea just because it looks cheap and has a good yield — or trying to chase returns — will probably end up giving you a surprise.

If you enjoyed today's podcast, please leave us a review and subscribe. If you would like more information regarding dividend growth or our investment strategy, please visit growmydollar.com. There you’ll find previous episodes and also our monthly newsletter. If you have any questions or anything to add to today's episode, please email ethan@growmydollar.com.

Past performance does not guarantee future results. Every investor should consider whether an investment strategy is right for them and all the risks involved. Stocks — including dividend stocks — are volatile and can lose money. Denewiler Capital Management may or may not have positions in the publicly traded companies mentioned herein.