This 4.5%-Yielding Dividend Stock Is Beating the S&P 500 and the Nasdaq. 3 Reasons That Can Continue in the Second Half of 2026

As of market close on July 7, the S&P 500 (SNPINDEX: ^GSPC) and Nasdaq Composite (NASDAQINDEX: ^IXIC) are up 9.6% and 11.1% year to date (YTD), respectively, and hovering around all-time highs. The tech sector -- which makes up 38% of the index -- is largely responsible for the strong gains because it is up 24.5% YTD.

However, some noteworthy value stocks are doing even better than the tech-heavy S&P 500. Kimberly-Clark (NASDAQ: KMB) is up 13.7% YTD, and that's without even factoring in two $1.28 per share dividend payments. Earlier this year, Kimberly-Clark raised its dividend for the 54th consecutive year, retaining its spot on the list of Dividend Kings, which have at least 50 consecutive years of dividend increases.

Here's why Kimberly-Clark remains a great dividend stock to buy for the second half of the year.

1. Kimberly-Clark is recession-resistant

Kimberly-Clark has a portfolio of leading household and personal care brands, many of which are paper-based. Its crown jewel is Huggies, which is the No. 2 diaper brand in the world behind Pampers. Other notable brands include Kleenex, Kotex, Scott, and Cottonelle.

Demand for these products tends to be consistent across economic cycles, though Kimberly-Clark's margins have been under pressure due to rising costs and inflationary pressures on consumer spending. In Kimberly-Clark's first-quarter 2026 earnings call, it forecasted $150 million to $170 million in additional costs if oil remained around $100 per barrel. Oil prices have come down significantly since that late April earnings call, but the months when oil was elevated will affect its full-year margins.

However, Kimberly-Clark is implementing productivity initiatives, new pricing with suppliers, and hedging programs to improve margins. Kimberly-Clark's chief financial officer, Nelson Urdaneta, said the following on the Q1 2026 earnings call:

I'd also remind everyone that we've got a solid track record over the last four years of recovering any input cost inflation and actually expanding margins. If you look at 2023 through 2025, we expanded both gross margins and operating profit margins beyond the levels pre-pandemic. So we're confident in our ability to cover all these input costs over time.

Kimberly-Clark isn't immune to consumer spending trends or macroeconomic factors, but it has done a good job adjusting to the new normal of cost inflation.

2. A major acquisition is right around the corner

In November 2025, Kimberly-Clark announced the acquisition of Kenvue (NYSE: KVUE). The consumer health company spun off from Johnson & Johnson in August 2023 and owns many noteworthy brands, including Aveeno, Neutrogena, Tylenol, Listerine, Johnson's, and BAND-AID.

Since then, Kimberly-Clark and Kenvue shareholders have overwhelmingly approved the acquisition, and Kimberly-Clark has moved forward with key organizational and leadership decisions.

The deal will diversify Kimberly-Clark's revenue streams and enhance its resilience in a recession. Kimberly-Clark expects the transaction to close before the end of the year.

3. Kimberly-Clark is dirt cheap

You may think that Kimberly-Clark would command a premium valuation, given that its stock price is outpacing the S&P 500 and Nasdaq in 2026. However, Kimberly-Clark fell 23% last year and is down 18.1% over the last decade.

Kimberly-Clark now trades at just 15.2 times analyst consensus 2026 earnings estimates of $7.54 per share. Its 10-year median price-to-earnings ratio is 21.9.

A top high-yield dividend stock to buy now

Investors who believe the Kenvue acquisition is the right move are getting a chance to buy Kimberly-Clark at a dirt cheap valuation. Kimberly-Clark expects the combined company to deliver $2.1 billion in annual run rate synergies by the second year following the acquisition, unlocking operating leverage and boosting margins.

In the meantime, investors can count on Kimberly-Clark's high-yield dividend. Although a high yield can sometimes indicate that a dividend is becoming unsustainable, Kimberly-Clark's earnings and free cash flow still exceed its payout.

With an established and recession-resistant portfolio of brands, Kimberly-Clark stands out as an attractive value stock for investors looking for an alternative to high-flying growth stocks. Unlike hyperscaler cloud computing companies, Kimberly-Clark isn't spending a ton of capital expenditures on big ideas that it needs to pay off. Rather, it is a stable stalwart that has rewarded income investors for decades.

Therefore, Kimberly-Clark can continue to outperform the S&P 500 and Nasdaq because its earnings growth expectations are already low. So even decent results would likely be received well by investors. However, Kimberly-Clark isn't without its risks.

If the Kenvue acquisition doesn't go as smoothly as planned or fails to unlock the cost savings Kimberly-Clark hopes for, it could make its dividend less affordable, which could strain its balance sheet. The combined company must also prove it can extract value from a larger portfolio of brands, which comes with a slew of execution challenges from a new leadership team.

Therefore, some investors may want to wait for the dust to settle after the Kenvue acquisition before buying the stock. Investors who don't mind the uncertainty can scoop up shares at an attractive valuation.

Daniel Foelber has positions in Kenvue and Kimberly-Clark. The Motley Fool recommends Johnson & Johnson and Kenvue. The Motley Fool has a disclosure policy.