The S&P 500 (SNPINDEX: ^GSPC) closed out the first half of the year at an all-time high -- a remarkable recovery considering how beaten down the index was in April. But not all stocks are enjoying the rebound.

Dividend-paying stocks PepsiCo (PEP 0.90%), Kimberly-Clark (KMB 0.57%), and Target (TGT 1.54%) have lost value over the last three years because they aren't consistently growing their earnings and consumer spending is under pressure.

However, these companies are Dividend Kings -- meaning they have paid and raised their payouts for over 50 consecutive years.

Here's why Pepsi, Kimberly-Clark, and Target are excellent choices for folks looking to boost their passive income.

Image source: Getty Images.

Challenges are mounting for consumer-facing companies

Investing is more about expectations than past performance. So the market can grow intolerant of companies that undergo multiyear periods of slowing or negative growth.

That's certainly been the case for Pepsi, Kimberly-Clark, and Target.

PEP Revenue (TTM) data by YCharts

As the chart shows, all three companies are experiencing slow or negative sales growth, and their stock prices are falling accordingly.

PepsiCo owns a variety of beverage and snack brands -- from flagship Pepsi to Gatorade, Mountain Dew, Tropicana, Frito-Lay snack brands like Lay's, Cheetos, Doritos, and Quaker Oats products. The diverse lineup helps make Pepsi a stable stalwart, but the company is seeing intense backlash from consumers who are drained from years of price increases.

Pepsi has made some acquisitions focused on healthier snacks and meal replacements to diversify its product lineup. And the company is revamping marketing and packaging efforts to cater to consumers. Still, Pepsi doesn't expect these efforts to offset near-term headwinds, so its guidance is fairly weak.

Kimberly-Clark makes paper-based professional products and has consumer brands such as Kleenex, Cottonelle, Viva, and Scott. It also offers a variety of adult care, baby and child care, and feminine care products. But the company is in a similar boat to Pepsi. Demand is flatlining, pressuring Kimberly-Clark's growth rate and margins. A multiyear strategy to reorganize the company has yet to produce tangible results.

Target's issues are even more severe. Despite promotions and exclusive product offerings, the company is struggling to boost in-store foot traffic. Target also mismanaged its inventory and hasn't tapped into e-commerce and delivery options nearly as well as peers like Walmart. Whereas Pepsi and Kimberly-Clark sell everyday-use products, Target's product mix is more discretionary in nature -- which has backfired as consumers look for value.

Stable and growing payouts

Although all three companies are far from the top of their game, they are all still highly profitable. They aren't turnaround stories in dire straits.

The payout ratio and free cash flow (FCF) per share compared to the dividend per share are useful metrics for gauging dividend affordability. The payout ratio is a company's earnings per share divided by the dividend per share -- with 50% to 75% generally considered a healthy range. But stable companies in non-cyclical sectors can be on the higher end of that range.

As you can see in the following chart, Pepsi, Kimberly-Clark, and Target all have good payout ratios.

PEP Payout Ratio data by YCharts

Pepsi is earning roughly the same FCF as its dividend, but Kimberly-Clark and Target are generating boatloads more FCF than dividends -- illustrating dividend affordability.

Heavily discounted valuations

All three companies have seen their valuations fall considerably since they have continued to generate strong earnings, but their stock prices are down.

PEP PE Ratio (10y Median) data by YCharts

To be fair, when a company is producing below its historical growth rate and not living up to investor expectations, it arguably deserves to trade at a discount. However, all three companies are now down considerably from their average valuations.

Pepsi's price-to-earnings (P/E) ratio is now under 20 even though it has historically been a premium-priced stock relative to the market.

Similarly, investors tend to give Kimberly-Clark a slightly premium valuation given its stable and reliable dividend and recession-resistant business model. But now, the company is trading at its lowest valuation in years.

Like most retailers, Target typically trades at a discount to the S&P 500. But its valuation is so cheap, the stock's P/E ratio is within striking distance of hitting single digits.

Three Dividend Kings that have fallen far enough

Pepsi, Kimberly-Clark, and Target stand out as excellent values, especially for patient investors looking to boost their passive income streams.

Not only do these companies have exceptional track records of growing their payouts, but they can also afford their dividends thanks to strong earnings. What's more, all three companies have high yields -- Pepsi at 4.3%, Kimberly-Clark at 3.9%, and Target at 4.5%.

Short-term-minded investors are making a mistake by dumping these stocks just because their results haven't been great lately.

Long-term investors who can filter out the noise are getting the chance to buy these names at compelling valuations.