Income investors seek a steady stream of dividends. Clorox‘s (NYSE: CLX) dividend history is long, and the stock might make a great addition to an income portfolio. Let’s take a look at the business, dividend history and payout safety going forward.
Business Overview and Highlights
Clorox is a $19-billion-dollar business. The company is based out of Oakland, CA and employs 8.7 thousand people. Last year, Clorox pulled in $6.1 billion in sales, which breaks down to $704 thousand per employee.
The company runs within the consumer sector and maintains a solid credit rating (A-) from the S&P. This allows Clorox to issue cheap debt to grow the business and finance other initiatives.
Clorox expanded its business a few years ago by acquiring Renew Life for $290 million. It’s a solid growth acquisition with a strong brand and good margins.
Clorox is also one of the top five ESG companies. ESG investing stands for environmental, social, and governance. The company’s operational management and ethics are considered very strong.
10-Year Clorox Dividend History
The company paid investors $1.84 per share a decade ago. Over the last 10 years, the dividend has climbed to $3.6. That’s a 96% increase! You can see the annual changes below.
The compound annual growth is 6.9% over 10 years… but over the last year, the dividend climbed 11.1%. The increase in dividend growth is a good sign. Clorox might work out as a great income investment. Let’s take a look at the yield.
Current Yield vs. 10-Year Average
Clorox’s long history of paying dividends makes it one of the best dividend stocks around. This also makes the dividend yield a great indicator of value. A higher yield is generally better for buyers. Sustainability is also vital, and we’ll look at that soon.
The dividend yield comes in at 2.55%, which is below the 10-year average of 3.59%. The chart below shows the dividend yield over the last 10 years.
The lower yield shows that investors have bid up the company’s market value. They might be expecting higher growth and payouts. But more often than not, the dividend yield is mean-reverting with share price changes.
Improved Dividend Safety Check
Many investors look at payout ratio to determine dividend safety. To do this, they look at the dividend per share divided by the net income per share. So a payout ratio of 60% would mean that every $1 Clorox earns, it pays investors $0.60.
Payout ratio is a good indicator of dividend safety… but accountants manipulate net income. They adjust for goodwill and other non-cash items. A better metric is free cash flow.
Here’s the Clorox’s payout ratio based on free cash flow over the last 10 years.
The ratio is fairly steady over the last 10 years, and the trend is up. The last year shows a payout ratio of 59.7%. This gives wiggle room for Clorox’s board of directors to raise the dividend.
Closing Thoughts on Clorox Dividend History and Safety
Although the the recent Clorox dividend per share grew above average, the yield is down. Investors have bid up Clorox’s market cap and it might not be a great value dividend play. The payout ratio is safe for now but the upward trend could be concerning for long-term investors.
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Good investing,
Rob
