Looking for a high-yield alternative to Costco Wholesale and Walmart? Consider This Dirt Cheap Dividend King Stock.

While Artificial Intelligence (AI) growth stocks have arguably captured the broader market spotlight in recent years, Costco Wholesale (NASDAQ: COST) again Walmart (NASDAQ: WMT) are two high-value stocks that have given investors a lot to smile about.

They produced nearly identical five-year returns — Walmart rose 191% compared to Costco’s 190%, 77.6% for S&P 500and 71% of Nasdaq Composite . They dominate the consumer staples sector, accounting for 26.5% of Vanguard Consumer Staples ETF — which tracks the industry closely.

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But Walmart and Costco have two glaring flaws — they’re price perfect and they have low dividend yields because their stock prices have outpaced their earnings and dividend growth rates. Walmart and Costco post forward price-to-earnings (P/E) ratios of 43.4 and 48.7, respectively, or more than double the S&P 500’s forward P/E of 21.2. Even other large mega-cap growth stocks such as Nvidia, Broadcom, an apple, Alphabets, Microsoft, Amazonagain Meta Platforms all have forward P/E ratios below 33.

Walmart’s yield is now just 0.8%, while Costco yields 0.5%, although it has been known to pay special dividends every few years that can raise the yield to close to 2% during those big periods.

Investors looking for a large buyer of staples at the best value and highest yield may want to take a closer look at Dividend King. Kimberly-Clark (NASDAQ: KMB)with a yield of 5.3% and has raised its payout for 54 consecutive years.

Pressures on consumer spending and the high cost of living are affecting consumer focus and choice sectors. But Walmart and Costco are two companies that are well positioned because they deliver value to customers. Both companies convert about four cents of every dollar sold into operating income — so customers are getting a really good deal. And it works in Walmart’s and Costco’s favor because of higher sales volume — with a staggering $713 billion in trailing 12-month sales for Walmart and $286 billion for Costco.

The chains’ special offers of Walmart and Costco give them the power to negotiate with manufacturers and support the creation of their own private label under brands such as Walmart’s Great Value, Walmart’s Sam’s Club Member Mark, and Costco’s Kirkland Signature. Private label products give these retailers more control over what’s on the shelves.

For example, in January, Sam’s Club announced that 100% of its member food and beverage products are now made without more than 40 unwanted ingredients or artificial colors, showing how quickly Walmart can adapt to changing consumer preferences and the growing number of health-conscious customers.

Manufacturers like Kimberly-Clark are being challenged by a long-term trend toward private label brands — which can be particularly effective in product categories where consumers don’t invest much in brands, such as everyday household products.

Kimberly-Clark is a paper product specialist — with leading products across paper towels, toilet paper, tissues, diapers, feminine care, and senior care. Demand for these products remains strong regardless of what the economy is doing, but they are also historically low-end product categories under pressure from private labels and consumer spending.

Kimberly-Clark recognizes that she cannot sit idly by and wait for a cyclical recovery in consumer spending. So it takes action with the planned acquisition of Kenvueannounced in November 2025 and scheduled to close in the second half of 2026. Kenvue will make Kimberly-Clark a home care and personal care powerhouse by adding brands like Band-Aid, Tylenol, Listerine, Aveeno, and Neutrogena to its portfolio.

Just one look at Kimberly-Clark’s sales and margins, and it looks like the company’s performance is deteriorating rapidly. But the results are not as bad as they seem.

In its fourth quarter 2025 earnings release, Kimberly-Clark noted that organic Net sales growth would have been positive if it had not come from its private label business. The company was ending its long-standing relationship with Costco, where Kimberly-Clark provided a cheaper version of Huggies sold under the Kirkland Signature brand.

Making a cheaper version of Huggies for private label retailers gives Kimberly-Clark high revenue, but private label sales tend to be low-margin and somewhat competitive with its core Huggies product. Put another way, Kimberly-Clark still makes a sale when a Costco customer buys Kirkland diapers made by Kimberly-Clark, but it’s a much lower sale than when a customer buys diapers under the Huggies brand.

Kimberly-Clark’s exit from the private-label diaper business, along with its acquisition of Kenvue, marks a major shift for Kimberly-Clark that could lead to higher margins. And it’s the kind of move that should chart the path to higher free cash flow and growing profits.

Costco and Walmart are amazing businesses. But their shares are overvalued given their high average single-digit to low double-digit earnings growth rates. They are also not good stocks for low-income investors, given their low yields.

Kimberly-Clark presents the best opportunity. Moving away from private label diapers and building its own products through the Kenvue acquisition should unlock efficiency gains from synergies. And with Kimberly-Clark trading at 12.8 times forward earnings, investors are already pricing in negative results.

Kimberly-Clark is a top price for investors who believe sales have gone too far, that competition from private labels has come at a price, and that the company will successfully integrate Kenvue’s products.

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Daniel Foelber holds positions at Kenvue, Kimberly Clark, and Nvidia. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Broadcom, Costco Wholesale, Kenvue, Meta Platforms, Microsoft, Nvidia, and Walmart and is short Apple stock. The Motley Fool has a policy of disclosure.

Looking for a high-yield alternative to Costco Wholesale and Walmart? Consider This Dirt Cheap Dividend King Stock. was first published by The Motley Fool