Clorox Stock Dividend Review & Investment Analysis

The Clorox Stock Dividend For Income, Growth, And Safety

The Clorox stock dividend is one of my favorite sources for passive income.

And I was waiting for a market decline to add to my shares. So I could collect more of the growing Clorox stock dividend.

We got a big market decline in early 2020. But Clorox stock performed so well that I didn’t see an opportunity to buy more shares.

That’s all in the rearview mirror. So, let’s see what’s going on with Clorox stock and its dividend. And kick it off with a few highlights…

Clorox stock analysis

Disclosure: At no cost to you, I may get commissions for purchases made through links in this post.

Clorox Stock Analysis & Dividend Review: Key Takeaways

1. First of all, Clorox is a strong company with great brands, competent management, and solid long-term financial performance.

2. Furthermore, the company has benefited from the recent trend of more time spent at home. And high demand for its cleaning products.

3. Clorox is one of many stocks with long and rich dividend histories. The company has paid annual dividends since 1970. And has increased the dividend rate each year since 1978. This record makes Clorox a Dividend Aristocrat. Furthermore, the company’s dividend appears very safe and set to grow into the future.

4. The stock has had a strong run. And currently looks overvalued.  But Clorox stock remains a solid long-term holding for a dividend growth stock portfolio. Perfect for holding in that IRA you have been meaning to open and fund. It is suitable for dollar-cost averaging purchases.  Or, additional investments during pullbacks in the stock price.

With those key points taken care of, let’s jump into the details. And work through a Clorox stock dividend review.

Should I buy the stock now? Or, wait for lower share prices? Is Clorox a good investment?

We will answer these questions and more. First up, a little background on the company and its products.

Looking for something different? Then check out our archives of dividend investing articles.

Clorox Company Background

The Clorox Company is a leading manufacturer and marketer of consumer products.

Clorox markets some very trusted and recognized brands in the household products area. This company also competes in food and beverage categories.

Consumer Brands

  • Clorox bleach and cleaning products
  • Pine-Sol cleaners
  • Liquid Plumber clog removers
  • Kingsford Charcoal
  • Hidden Valley dressings and sauces
  • Glad bags, wraps, and containers
  • Burt’s Bees personal care products
  • Brita water filters
  • Poett home care products
  • Fresh Step cat litter
  • RenewLife digestive health products
  • Rainbow Light, Natural Vitality, and Neocell dietary supplements

Professional Services Brands

The company also markets brands for professional services, including

  • Clorox Healthcare
  • Commercial Solutions

Brand Strength

Clorox has tremendous brand strength. More than 80 percent of the company’s sales are generated from brands that hold the number 1 or 2 market share positions in their categories.

Source:  The Clorox Company – Who We Are

Clorox Business Strategy

Clorox calls their current business strategy IGNITE. Here are a few key points from it.

Objectives

  • Maximize economic profit
  • Pursue profitable, sustainable, responsible growth

Strategy

  • Fuel growth in brands through cost reductions, smart investments, international businesses, and targeted acquisitions
  • Innovate to improve consumer brand experiences and consumer shopping experiences
  • Reimagine work to be faster, more inclusive, and digital

Annual Financial Targets

  • 2-4% sales growth
  • 25-50 basis points operating margin improvement
  • 11-13% free cash flow as a percentage of sales

Clorox Priorities for Free Cash Flow

  1. Invest in the business
  2. Support the Clorox stock dividend payments
  3. Manage debt
  4. Repurchase shares of their stock

I like that they mention the dividend as the number 2 priority for using cash flow.

Of course, we know that Clorox pays a dividend to reward shareholders. And we now know supporting the dividend is a priority for management.

Clorox Stock Symbol

Before we move into the dividend review. We must know this fact to buy Clorox stock.

The stock trades on the New York Stock Exchange. And operates under the stock ticker symbol CLX (NYSE: CLX).

I trade my stocks fast and free using the Webull app. Check Webull out if you are looking for a great online stock broker that utilizes the latest technology.

So now, let’s cover all the facts and figures regarding the Clorox stock dividend. And see exactly how the dividends work for stockholders.

Clorox Dividend Per Share

On an annual forward basis, the Clorox stock dividend payout is $4.64 per share.

You may be asking, what does annual forward dividend mean? It is the most recent dividend rate per share approved by the Clorox board of directors. Multiplied by the number of times Clorox pays a dividend each year.

Clorox Stock Dividend Yield

Based on the recent stock price, the payout rate puts the Clorox stock dividend yield at 2.6%.

First of all, Clorox is not a high yield dividend stock. Furthermore, the stock’s recent and rapid rise has caused the Clorox stock dividend yield to drop significantly.

According to the Simply Investing report, the current Clorox stock dividend yield is lower than the 20-year average. This is one indication of an overvalued stock. More on Simply Investing and stock valuation a little later.

How Often Does Clorox Pay Dividends?

Clorox stock dividends are paid regularly. Specifically, every 3 months or 4 times per year. Each quarterly dividend payment is one-fourth of the annual rate.

In What Months Is The Clorox Stock Dividend Paid?

The timing of dividend payments is consistent. They are paid in these months: February, May, August, and November. Usually, the payments are made during the middle of these months.

This is a typical dividend payment pattern. For many U.S. based stocks that pay dividends on a quarterly basis.

What Is The Ex-Dividend Date For Clorox Stock?

To receive the next Clorox stock dividend payment, you must complete your purchase (or already hold your shares) before the ex-dividend date.

First of all, dividends are subject to the approval of their board of directors. As a result, both the ex-date and the payable date change slightly each time a dividend is paid.

So, it’s best to check the Clorox dividend history page for the exact date each quarter. It can be found on the Clorox investor relations website.

To give you a general idea, the Clorox ex-dividend date falls 2-3 weeks prior to when each dividend is paid.

Clorox Dividend History

Clorox has a long history of paying dividends to shareholders. The company started paying dividends each year in 1970.

Let’s see what long-term dividend growth looks like. It is important for understanding and identifying good dividend stocks.

Clorox Is A Dividend Aristocrat

Clorox, a Dividend Aristocrat, not yet a Dividend King

Clorox has increased its dividend rate per share every year starting in 1978. This accomplishment makes Clorox a Dividend Aristocrat

Dividend Aristocrats are those firms that have increased dividends for at least 25 years in a row. But, we can’t crown Clorox a Dividend King just yet.

Because Dividend Kings have increased their dividends for at least 50 years in a row. However, I’m pretty sure we will be awarding Clorox a dividend king crown a few years from now.

So, we know Clorox is a stock with a long history of paying increasing dividends. But, we need a solid dividend growth rate too. Let’s see how that looks…

Clorox Stock Dividend Growth Rate

As shown in the table below, Clorox has had high dividend growth for the last several years.

Table 1: Clorox Compound Annual Dividend Growth Rate

1 Year3 Years5 Years7 Years
10.4%9.8%7.5%7.5%

A dividend growth profile like this is impressive. It makes compounding dividends in an investor’s portfolio much easier.

Clorox Dividend Increase

And Clorox management recently announced their dividend increase for the fiscal 2022 quarterly dividend payments.  It came in a more modest 4.5%.

Always hoping for short term dividend appreciation from investments, I’m disappointed in the size of this year’s dividend increase. But, I’m not surprised given the uncertainty of recent world events. On the other hand, those events have played in Clorox’s favor.

Clorox Dividend Policy

Clorox has an impressive long-term dividend history. And an equally impressive history of dividend growth.

The company has stated that supporting the dividend is a priority for their cash. But, Clorox stops short of clearly communicating a specific dividend growth policy.

This is not a red flag. Just something to be aware of as a good dividend investor.

Next, let’s see what the business fundamentals tell us. I will use some of the elements from the companies financial reporting to do so.

From that information, I can draw conclusions about future Clorox dividend growth. And current dividend safety. Even without a formal dividend policy statement provided by the company.

Clorox Revenue & Sales Trends

First of all, the company’s goal is to increase annual net sales by 2-4%.

Furthermore, for most recent years they have performed at the lower end of this range.

Finally, in 2020 increased demand for household products has increased revenue growth beyond their goal. At least, for the time being.

Chart 1: Clorox 7-Year Revenue Trend

clorox stock analysis

Clorox Sales Growth Goals

Prior to 2020, the company dealt with a difficult and competitive environment for consumer products.  Competition is intense from other consumer goods companies, private label brands, and local brands in foreign countries.

The Foundation For Clorox Sales Growth

To complete at a high level, Clorox management believes that sales growth will come as a result of delivering superior consumer value.   In turn, they believe superior value is an outcome of:

  • The right price
  • Differentiated products
  • Great brand recognition

Finally, the geographic reach and growth rate of Clorox sales are depicted in the table below.

Table 2: Clorox Global Sales

Region% to TotalGrowth Rate Goal
US-Domestic85%2-4%
International15%1-4%
Total Company100%2-4%

Continuing with business fundamentals, let’s look at earnings, cash flow, and dividend payout ratios next.

Clorox Stock Dividend Payout Ratio Based On Earnings

Consistent earnings growth shown in the chart below has been a result of

  • Revenue growth
  • Margin expansion from price increases and cost savings
  • Operating expense management

Chart 2: Clorox Dividends & Earnings Per Share

clorox dividend payout ratio: earnings based

And, the dividend has grown right along with profits.  Looking at the Clorox dividend payout ratio, we can see it now runs well below 60% of earnings.

Dividends are most frequently paid in cash. So, let’s see how much cash flow Clorox pays out in dividends next…

Clorox Dividend Payout Ratio Based On Cash Flow

First of all, the company’s free cash flow generation is strong.

Furthermore, Clorox dividend payments look secure at about 50% of its cash flows during the last 3 years.

Finally, after paying dividends, the remaining cash goes mainly to fund share repurchases.

Chart 3: Clorox Dividends And Cash Flows

Clorox cash based dividend payout ratio

To sum up, Clorox management is aggressive in returning cash to its shareholders. They do this through both dividends and share repurchases. And their use of cash makes for a very shareholder-friendly company.

Next, I want to forecast how friendly the company will be with dividend growth in the future.

Clorox Stock Dividend Growth Rate Projection

Clorox doesn’t give specific guidance about dividend growth.  However, their short and long term dividend payment record suggests growth will definitely continue in the future.

For my planning purposes, I am going to assume a 6-8% annual dividend growth rate in the coming years.  I am basing my projection on the following:

  • Increased revenue contributing 3% earnings growth
  • Profits growing faster than revenue adding another 3% to earnings
  • A rising dividend payout ratio trending up to 60%+
  • Consistency with the dividend growth rate over the past 5-7 years

In other words, earnings will grow by 6% per year. And management will increase the dividend at a slightly faster rate. Resulting in a rising dividend payout ratio.

Next up, the company’s financial position. Then I can conclude on dividend safety.

Clorox Financial Position

It’s a good practice to look at a company’s total financial picture. Similar to managing your personal finances.

I manage my total financial picture using Personal Capital. Best of all, Personal Capital is free to use and easy to sign up for.

But back to Clorox, specifically. I will look at the company’s financial position in two ways. Debt on the balance sheet. And credit ratings.

Balance Sheet

Clorox carries a relatively high amount of debt including lease obligations.  Their debt to equity ratio checks in at a lofty 2.4 to 1.

But this is down significantly since I last reviewed the company. And they have more than $800 million in cash reserves for liquidity. It appears that management has used its recent favorable performance to improve the balance sheet.

Over the long-term, Clorox uses debt primarily to pay for acquisitions.  In contrast, equity grows slowly because Clorox management is returning most equity from earnings back to shareholders.

As mentioned, the returns to shareholders are in the form of share repurchases and dividends. And this leads to a higher debt to equity ratio over time.

But due to the consistency of the Clorox business. And the strength of free cash flow generation. The debt to equity ratio is not a concern for me. 

However, it does bear watching.   And I’m glad the company has identified debt management as the #3 priority for using cash flow.

Credit Ratings

Clorox has a Baa1 and A- credit rating from Moody’s and S&P, respectively. 

As shown in the table below, these ratings represent “investment grade – low to moderate credit risk” evaluations.

Table 3: Credit Rating Evaluation Grid

Credit rating evaluation table

A solid dividend-paying company normally has an investment-grade credit rating.  But, the Clorox ratings are at the lower end of the investment-grade range.  I suspect the high debt levels play a role in the credit ratings being a little lower than I would like.

Not only is it a good idea to check on company credit scores. It’s also smart to keep an eye on your credit score. I use Credit Karma to check mine. It’s easy to sign up and best of all it’s free.

Now for dividend safety…

Clorox Stock Dividend Safety

The Clorox dividend appears very safe to me.  It is supported by:

One thing to watch out for is high debt. But the debt is supported by cash flow from a proven, predictable business model.

Our Clorox stock analysis would not be complete without a check on the stock’s valuation. Let’s do it.

Clorox Stock Valuation Review

Let’s judge value in several ways:

  • Clorox dividend discount model
  • Morningstar fair value estimate
  • Price to earnings ratio
  • Simply Investing report

Clorox Dividend Discount Model

The single-stage dividend discount model considers several factors I have discussed thus far. This dividend model is easy to use for calculating the intrinsic value of dividend stocks.

Here are the inputs for the formula. The first 2 I have already discussed. While the 3rd assumption is my desired annual investment return.

  • The current annual forward dividend rate
  • Projected dividend growth
  • My desired annual return on investment – 10%

Using these assumptions, the dividend discount model calculates the fair value of Clorox stock to be $165 per share.

Clorox Stock Price to Earnings Ratio

The Clorox stock price to the fiscal year 2020 earnings sits in the mid 20s. 

Clorox stock is trading at a premium price to earnings valuation.  This is not an unusual situation for a high-quality dividend growth stock.

Morningstar Fair Value

The investment analysis firm Morningstar believes Clorox stock is fairly valued at $171 per share.

Simply Investing Report

Clorox stock valuation
Click to learn more from Simply Investing

I’ve used the Simply Investing Report for many months. It’s a great source for dividend stock recommendations and analysis.

The Simply Investing report makes a value decision based on these criteria:

  • Price to earnings ratio
  • Current dividend yield versus the long-term historical average
  • Price to book ratio

Based on these measures, Simply Investing deems Clorox stock to be overvalued.

Clorox Stock Valuation Summary

We have looked at a number of valuation methods that suggest a range of values. The value measurements suggest Clorox stock is overvalued at recent prices.

So, it’s time to wrap up. With a few concluding thoughts. And answers to frequently asked questions.

Clorox Stock And Dividend Analysis: Wrap Up

Let’s conclude with what we have learned from this Clorox stock analysis and dividend review.

The Clorox Business

Clorox Company represents a nice combination of:

  • Good products
  • Strong brand performance
  • Competent management
  • Solid financial performance

Clorox Stock Dividend Metrics

When evaluating the company’s dividend metrics, I see

  • A high degree of dividend safety
  • An excellent historical dividend track record
  • Strong future dividend growth potential

Is Clorox A Good Investment?

I believe Clorox is a good investment. Yes. Absolutely I do. And I would love to own more Clorox shares.

And, I expect to hold my shares for the long term. But, I would prefer a higher dividend yield. Which means I need a lower stock price.

Is Clorox Stock A Buy?

So, I believe the stock is overvalued at recent prices. It’s not a great stock to buy at this time.

My Path Forward With Clorox Stock

Every time I review Clorox stock, it looks overvalued. Even during the worst of the most recent bear market.

I’d like to own more shares. But the only way I see to do this is by making small investments over time. In other words, a dollar-cost averaging approach. Or, looking for periodic dips in the price to buy more.

Further Reading On Dividend Stocks And Dividend Investing

My Favorite Dividend Investing Resources

Disclosure & Disclaimer: I am not a licensed investment adviser, financial adviser, or tax professional. And I am not providing you with individual investment advice, financial guidance, or tax counsel. Furthermore, this website’s only purpose is information & entertainment. And we are not liable for any losses suffered by any party because of information published on this blog.

I currently own Clorox and collect the Clorox stock dividend.