Most acquirers are idiots who pay massive premiums for earnings. Kimberly-Clark just proved they’re not most acquirers.
KMB is buying Kenvue (the J&J spinoff with Tylenol, Listerine, all that stuff) at 16 times earnings.
That’s the exact same multiple KMB trades at. When’s the last time you saw an acquirer get a company at their own PE ratio? Never, because it doesn’t happen.
Here’s why this deal works: KMB gets $2-3 billion in synergies just from combining marketing operations.
Kenvue makes great products but they’re terrible marketers.
KMB?
They’re marketing machines. That synergy alone pays for most of the cash portion of this deal.
The math gets even better. This is immediately accretive to earnings, KMB keeps paying their 5% dividend, and you’re buying into a $32 billion consumer health giant at a reasonable valuation while everyone else is chasing overvalued tech stocks.
This is where covered calls become an income machine
KMB already pays a solid 5% dividend, but why settle for 5% when you can squeeze significantly more out of your position?
This is where covered calls become beautiful. I’m not just buying KMB and hoping it goes up.
I’m buying the stock and simultaneously selling long-dated call options against my shares – we’re talking LEAPS that expire over a year out. That heavy premium I collect from selling those calls?
Pure income that drops my effective cost basis and boosts my total return well above that 5% dividend.
Check out these numbers
Here’s how the numbers work. I’m buying KMB around current prices but immediately selling LEAPS against my position.
That call premium I collect – it’s substantial when you’re going out over a year – drops my effective cost significantly.
Now, if KMB stays at or above my strike price by expiration, I make the difference between my reduced net cost and the strike price, plus I keep that heavy premium I collected upfront.
That’s roughly a 27% return on my actual investment, plus I’m collecting that 5% dividend the whole time I own the shares.
So we’re looking at potentially 30%+ total returns from a company that makes toilet paper and Tylenol.
In this market, I’ll take that all day.
The timing couldn’t be better
In this volatile market, covered calls are income machines.
The higher the volatility, the more premium you collect when you sell those calls. And KMB just became the perfect candidate because:
Predictable cash flows – Consumer staples don’t disappear. People still need diapers, tissues, and Tylenol regardless of what the market does.
Merger stability – This deal removes uncertainty and creates a more diversified, stronger company.
Reasonable valuation – At 16 times earnings with immediate synergies, KMB isn’t some overpriced momentum play that could crater overnight.
Perfect timing – While growth stocks are getting hammered, investors are rotating into safety plays with actual dividends and real earnings.
If the stock stays flat or goes up modestly, I keep collecting both the dividend and the option premiums.
If it really takes off and my shares get called away, I still made my target return – just faster than expected. If it drops, that premium I collected cushions the downside.
This isn’t about picking the next 10-bagger. This is about generating consistent, predictable income from quality companies while everyone else is panic-selling their speculative positions.
The risks? I’m not losing sleep
Remember what I always say: your portfolio should move with the market, not get demolished by it. If the market’s down 1% and you’re down 5%, you’re in the wrong stocks.
KMB gives you exposure to a solid business with defensive characteristics, plus the ability to generate income regardless of direction.
The Tylenol lawsuit noise? Please. These companies deal with litigation constantly. Johnson & Johnson has been fighting talcum powder lawsuits for years while hitting all-time highs.
This is factored into the deal pricing.
We’re getting a premier consumer health company at a fair valuation, with immediate merger synergies, a 5% dividend, and the ability to generate additional income through covered calls.
Your Action Plan
In a market where tech darlings are crashing 10-20% on earnings, I’ll take predictable income from toilet paper and Tylenol all day.
These are exactly the kind of strategic, income-generating plays we identify and execute in Catalyst Cash-Outs.
We’re focused on building wealth through smart positioning, risk management, and income strategies that work in any market environment.