Clorox Dividend Stock Analysis
Load up the grill with Kingsford charcoal. Put some Hidden Valley Ranch on your side salad. Then clean up with some disinfecting wipes. You may have guessed it. The Clorox Company and the Clorox dividend is our focus today.
Please join me for a dividend deep dive of this long time US based company. They are best known for their namesake brand of liquid bleach.
The Clorox Company is a leading manufacturer and marketer of consumer products. Clorox markets some very trusted and recognized brands that include:
- Clorox bleach and cleaning products
- Pine Sol cleaners
- Liquid Plumber drain cleaner
- Kingsford Charcoal
- Hidden Valley dressings
- Glad bags and food wraps
- Burt’s Bees lip care products
- Brita water filters
CLOROX DIVIDEND YIELD
Clorox is paying an annualized forward dividend of $3.84 cents per share. This represents a 3.0% yield at the recent price of $129 per share.
COMPOUND ANNUAL DIVIDEND GROWTH RATE
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The Clorox dividend was recently increased by 14.3%. And, the increase was accelerated one quarter earlier than their typical annual timing. In addition, the company stated they were anxious to put the corporate tax reduction to work for the benefit of shareholders. This recent dividend increase is clearly an upside break from past dividend growth trends. Most noteworthy, Clorox has increased its dividend annually for 41 consecutive years!
The company’s goal is to increase annual net sales by 3-5%. Over the past several years they have performed slightly below this range. Domestic US sales account for about 80% of the total revenues. However, international sales are targeted to grow more rapidly in coming years. Management estimates future international sales growth of about 5-7% annually.
CLOROX DIVIDEND, EARNINGS AND PAYOUT RATIO
Consistent earnings growth has been a result of
- Revenue growth
- Gross profit margin expansion from price increases and cost savings
- Disciplined control over selling, general and administrative expenses
And, the dividend has grown along with earnings. As a result, the dividend appears safe at roughly 60% of both earnings and free cash flow.
A lower dividend payout ratio is a positive metric. It shows the company has ample room to raise the dividend in coming years. Or, withstand an earnings drop with out having to reduce the dividend.
VALUATION & CONCLUSION
Stock prices in the consumer staples sector have been under pressure this year. Clorox has not been immune to this sell off. The combination of higher earnings and a lower stock price have reduced the 2018 price to earnings ratio to about 20 times. A lower ratio typically represents a better value for the investor.
WRAPPING IT UP
I believe Clorox represents a nice combination of
- good products
- competent management
- solid financial performance
In addition, they have a track record of rewarding shareholders. I have a relatively small position in Clorox at this time. And, I would like to increase it. I will consider adding to my position below $125 per share. Most recently, I made a purchase in May at $118.72 per share.
OTHER RELATED ARTICLES
I hope you liked this post. If so, here are a couple others that you may find interesting:
- The model portfolio where Clorox resides: The Dividend Deluxe
- The process I use for dividend stock analysis: Dividend Deep Dive
WHAT ARE YOUR COMMENTS?
Do you own Clorox? Do you use or like any of their products?
Leave a comment and let us all know!
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