Clorox Dividend History and Safety

Original post

Income investors seek a steady stream of dividends. Clorox dividend history is long and it might make a great addition to an income portfolio. Let’s take a look at the business, dividend history, and payout safety going forward.

Clorox is a $19-billion-dollar business. The company is based out of Oakland, CA and it employs 8.7 thousand people. Last year Clorox pulled in $6.1 billion in sales and that 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.

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 and you can see the annual changes below…

Clorox Dividend History 10-Years

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 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% and that’s below the 10-year average of 3.59%. The chart below shows the dividend yield over the last 10 years…

Clorox Dividend Yield History 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 the payout ratio to determine dividend safety. 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.

The 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 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.

If you’re interested in seeing more, please comment below. You can also check out more dividend investing articles by clicking here.