Kenvue (KVUE 0.54%) stock is down since completing its spin-off from Johnson & Johnson (JNJ 1.13%) in August 2023. But with more than a year of results now in the books, investors have had time to acclimate to Kenvue as an independent entity.

Kenvue is a stable stalwart with a growing dividend. But the lack of organic growth is unimpressive, and there's room for improvement from a cost standpoint.

Here's why the future is bright for Kenvue and why the high-yield dividend stock is worth a closer look for risk-averse investors looking to boost their passive income stream.

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A strong lineup of top brands

Kenvue is a pure-play consumer health company with a portfolio of established brands, including Band-Aid, Listerine, Tylenol, Aveeno, Neutrogena, and more.

Since many of these brands are household names, Kenvue doesn't have to spend advertising dollars on building awareness. Rather, the main objective is to manage costs, support existing product lineups, and nurture brands through new product innovation and marketing.

Demand for Kenvue's products can be steady no matter the economic cycle, making the business fairly resilient to recessions. But as Kenvue has shown as an independent company, the business can get bogged down by sluggish growth.

Activist investor pressure

Kenvue has already been a target of criticism. In October, Starboard Value, an activist investor, took a significant stake in the company -- a sign that it sees solutions to Kenvue's challenges.

On Feb. 5, Kenvue issued a statement titled "Kenvue Highlights Commitment to Shareholder Value." The statement was in response to Starboard submitting four nominees for Kenvue's board of directors, which has 11 seats.

Kenvue defended its board members in the statement, but pressure from activist investors adds a layer of uncertainty to Kenvue's strategy.

Kenvue is heading in the right direction

In the meantime, the company is progressing on its Vue Forward plan. By 2026, it expects to achieve $350 million of annualized savings. Kenvue's adjusted gross margin is 60.4% -- which is 400 basis points above pre-pandemic levels. Progress on Vue Forward, paired with margin expansion, allowed the company to boost brand investment by 20%.

Those investments went toward increasing advertising, including more social media influencer-led campaigns, higher engagement with healthcare professionals, expanded in-store presence, and new performance and incentive models tied to business outcomes.

It's worth mentioning that Kenvue is still dealing with baggage from separating from J&J. On the recent earnings call, Kenvue said it is about 90 days away from completing its operational separation from J&J. It is working through transition service agreements and finding more cost-effective ways to operate as an independent company.

Still, Kenvue only expects 2% to 4% organic sales growth in 2025, but with faster growth in the second half of the year. Factor in a 3% foreign currency headwind, and Kenvue expects net sales to be essentially flat year over year -- with a range of down 1% to up 1%.

Thinking long-term with Kenvue

Kenvue is using cost savings from efficiency improvements to back its strong portfolio of brands with a multifaceted marketing effort, specifically focusing on tapping into younger generations through social media. The near-term outlook may be weak, but Kenvue is laying out a clear plan to return to growth while also restoring confidence in its strategy despite pressure from Starboard Value.

Kenvue is a good buy if you believe in the strength of its brands and the untapped potential to market those brands to a wider audience. Neutrogena, for example, is the No. 1 face care brand in the U.S. for brick-and-mortar and online. In the U.S., the Aveeno Kids range is the fastest-growing product line in its category.

In addition to growth potential, Kenvue pays a stable and growing dividend. In July 2024, Kenvue raised its dividend by 2.5%. Factoring in when Kenvue was still a part of J&J, the company is technically a Dividend King with 61 consecutive years of dividend increases.

Kenvue also has a reasonable valuation, with a forward price-to-earnings ratio of 19.1, which isn't bad for a high-quality Dividend King.

With a 3.7% yield, a strong portfolio of brands, and strategies in place to return to growth, Kenvue is a solid income stock for patient investors to buy now.