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.
In case it’s not obvious, the events of 2020 led to increased demand for cleaning products and household goods. So Clorox stock did not stumble with the rest of the stock market.
Disclosure: This post contains referral links.
Clorox Stock Dividend Analysis
So let’s jump right into a Clorox stock analysis. And work through a Clorox stock dividend review.
Should I buy more Clorox stock now? Or, wait for lower share prices? Is Clorox a good investment?
We will answer these questions and many more. I will also check in with one of my favorite dividend investing resources, the Simply Investing report.
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 and food and beverage categories.
- 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
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 Stock Symbol
Clorox stock trades on the New York Stock Exchange. It trades under the stock ticker symbol “CLX”.
Clorox Business Strategy
Clorox calls their current business strategy IGNITE. Here are a few key points from it.
- Maximize economic profit
- Pursue profitable, sustainable, responsible growth
- 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
- Invest in the business
- Support the Clorox stock dividend
- Manage debt
- 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 know supporting the dividend is a priority for management.
So, let’s cover all the facts and figures regarding the Clorox stock dividend next.
Clorox Dividend Per Share
On an annual basis, the Clorox stock dividend payout is $4.44 per share.
Clorox Stock Dividend Yield
Based on the recent stock price, the dividend payout puts the Clorox stock dividend yield at 2.0%.
Clorox is not a high yield dividend stock. 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 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 $1.11 per share.
In What Months Is The Clorox Stock Dividend Paid?
The timing of dividend payments is consistent. They are paid in these months: Feb, May, August, and November.
What Is The Ex-Dividend Date For Clorox Stock?
To receive the next Clorox stock dividend payment, you must complete your purchase by the ex-dividend date. The Clorox ex-dividend date is different each time it pays a dividend.
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.
Clorox Dividend History
Clorox has a long history of paying dividends to shareholders. This year marks the 51st consecutive year Clorox has paid a dividend.
Clorox Stock Dividend Growth Rate
As shown in the table below, Clorox has had high dividend growth for the last 3 years.
|1 Year||3 Years||5 Years||7 Years|
And Clorox management recently announced the Clorox dividend increase for their fiscal 2021 quarterly dividend payments. It came in a modest 4.7%.
Always hoping for short term dividend appreciation, I’m disappointed in the size of this year’s dividend increase. But, I’m not surprised given the uncertainty of recent world events.
Clorox Is A Dividend Aristocrat
Now let’s take a long term view of past Clorox dividend growth. Most noteworthy, the company has increased its dividends for 43 consecutive years.
This accomplishment makes Clorox a dividend aristocrat. Dividend Aristocrats are those firms that have increased dividends for at least 25 years in a row.
We can’t crown Clorox a Dividend King just yet. Dividend Kings have increased their dividends for at least 50 years in a row.
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.
Next, let’s see what the business fundamentals tell us. From them, I can draw conclusions about future Clorox dividend growth and current dividend safety.
Revenue And Sales Trends
Clorox Sales Growth Goals
The company’s goal is to increase annual net sales by 2-4%.
Over the past several years they have performed at the lower end of this range. But in 2020, increased demand for household products has increased revenue growth beyond their goal.
It is a difficult competitive environment for consumer products companies. Competition is intense from private label brands and local brands in foreign countries.
The geographic reach and growth rate of Clorox sales is depicted in the following table:
|Region||% to Total||Growth Rate Goal|
The Foundation For Clorox Sales Growth
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
Clorox Stock Dividend Payout Ratio Based On Earnings
Consistent earnings growth has been a result of
- Revenue growth
- Margin expansion from price increases and cost savings
- Operating expense management
And, the dividend has grown along with profits. Looking at the Clorox dividend payout ratio, we can see it runs at about 60% of earnings.
Clorox Dividend Payout Ratio Based On Cash Flow
Free cash flow generation is strong. Clorox dividend payments are running at less than 60% of cash flow. After paying dividends, the remaining cash goes mainly to fund share repurchases.
Overall, Clorox management is aggressive with returning cash to its shareholders. They do this through both dividends and share repurchases.
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% 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
- Dividend payout ratio remaining steady at 60%
In other words, earnings will grow by 6% per year. And management will increase the dividend at the same rate. This will leave the dividend payout ratio near the 60% level.
Clorox Financial Position
Let’s move on to the company’s financial position. That will give me the last piece of information to finalize my judgment about dividend safety.
Clorox carries a relatively high amount of debt including lease obligations. Their debt to equity ratio checks in at a lofty 4.7 to 1.
Clorox uses debt primarily to pay for acquisitions. In contrast, equity rarely grows 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 huge 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.
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”.
A solid dividend-paying company normally has an investment-grade credit rating. The Clorox ratings are at the lower end of investment-grade. The high debt levels likely play a role in the credit ratings being a little lower.
Clorox Stock Dividend Safety
The Clorox dividend appears very safe to me. It is supported by:
- A stable and consistent business model
- Dividend payout ratios at approximately 60%
- Investment-grade credit ratings
- A long history of uninterrupted dividend payments
One thing to watch out for is high debt. But the debt is supported by cash flow from a proven, predictable business model.
Clorox Stock Valuation
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 stocks.
Here are the inputs for the formula:
- Current annual dividend payment – $4.44 per share
- Projected dividend growth – 6.0%
- My desired annual return on investment – 9%
Using these assumptions, the dividend discount model calculates the fair value of Clorox stock to be $157 per share.
Clorox Stock Price to Earnings Ratio
The Clorox stock price to the fiscal year 2020 earnings sits at about 33 times.
Clorox stock is trading at a premium price. 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 $149 per share.
Simply Investing Report
The Simply Investing report makes a value decision based on these criteria:
- Price to earnings ratio 25 or less
- Current dividend yield higher than its historical average
- Price to book ratio at 3 or less
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. Here is a summary.
- Dividend Discount Model – $157 per share
- Price to Earnings Ratio at 32 time – looks “pricey”
- Morningstar Fair Value – $149 per share
- Simply Investing report – Overvalued
The value measurements suggest Clorox stock is overvalued at recent prices.
Clorox Stock And Dividend Analysis Summary
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
- Projected dividend growth of 5-7% annually
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.
Is Clorox Stock A Buy?
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.
Further Reading On Dividend Stocks And Dividend Investing
- Simply Investing report review
- Dividends Deluxe model portfolio
- Walmart stock and dividend analysis
- Hormel Foods for dividend growth and safety
My Favorite Dividend Investing Resources
- Dividend stock recommendations from Simply Investing
- Trade stocks fast and for free with the Webull app
- Morningstar for great stock research
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