Last October was not a good month for Kenvue, the consumer healthcare giant spun out from Johnson and Johnson in 2023. You know the brands—Tylenol, Listerine, Aveeno, Band Aid, Neutrogena, Nicorrete—these are not going anywhere. With bad press—"Tylenol causes autism"—the stock dived to $14 a share. 

Kenvue is certainly no growth company. Over the last few years, sales have remained static around $15 billion a year with pre-tax earnings averaging just over $2 billion. 

Kenvue generates this cash on less than $7 billion of tangible assets (receivables, inventories, and property, plant, and equipment). Because their products hardly change, they have low ongoing capital investments, which totaled only $2 billion over the last five years, about one-fifth of the cash it generated. 

Despite this, I didn't invest in Kenvue. What made Kenvue a tough call?

The dividend. Management has committed to a dividend of $1.5 billion a year, a significant portion of the company's pre-tax earnings.

If Kenvue continues to face headwinds, it's possible management may decide to cut the dividend to free up capital to support their turnaround efforts. Management may decide to take a big bath to write down intangible assets and goodwill, which totaled just over $18 billion, or 67% of its total assets. 

I believe Kenvue will do well, but it certainly has its challenges. Who knows what management will do in the coming years. 

So, for now at least, it's a pass.