Two Dividend Stocks to Own in 2010

See all our 2010 stock picks.You can also see Cramer's New Dividend Portfolio.

BOSTON (TheStreet) -- A shaky economy and subdued consumer spending mean undervalued, dividend-paying stocks may outperform next year. Two top picks are Kimberly-Clark(KMB) and CenturyTel(CTL).

Kimberly-Clark

Kimberly-Clark's third-quarter profit surged 41% to $582 million, or $1.40 a share, as revenue declined 2% to $4.9 billion. Its operating margin widened from 13% to 18% as the Dallas-based company raised prices for its products, which include Huggies diapers and Kleenex tissue, and cut costs. An expense-reduction plan saved $61 million during the quarter, and lower fiber costs kicked back another $130 million. Over the past three years, Kimberly-Clark has increased earnings per share by an average of 13% annually.

During the recession, management invested in core brands and streamlined operations. It's a familiar story, but few have implemented as effectively as Kimberly-Clark. Despite lower volumes, Kimberly-Clark forfeited just 4% of gross sales over the past year, a testament to the popularity of its products. Grace Barnett, a director at Fitch Ratings, expects the household-products industry to grow 5% in 2010, driven by consumers in emerging markets.

Of seventeen analysts surveyed by Bloomberg, six recommend purchasing shares and the remainder advise holding them. The stock continues to record 52-week highs, repelling contrarian investors. The performance is warranted. Kimberly-Clark is cheaper and pays shareholders more than comparably sized peers. Its 3.6% dividend yield is higher than that of Procter & Gamble(PG) and Colgate-Palmolive(CL), which have equally recognizable brands and international exposure.