Clorox offers one of the best dividends around
Clorox (CLX) has a strong track record of rewarding shareholders with higher dividends and share buybacks. Over the past four years, Clorox returned about $2 billion to investors through share repurchases and dividends. In the first half of fiscal 2017, the company returned $389 million in the form of $206 million in dividends and $183 million in share repurchases. CLX’s dividend payout ratio remains above 60%.
Clorox’s dividend growth
Clorox is a dividend aristocrat—a term used for any company that has increased its dividends for more than 25 years in a row. In fact, Clorox has increased its dividend for 39 consecutive years. Last year, the company increased its quarterly dividend by 4% to $0.80 per share.
This growth in dividends is supported by the company’s strong free cash flow generation (defined as operating cash flow minus capital spending) capability. In the first half of fiscal 2017, it generated about $154 million in free cash flow.
Simply put, dividend yield signifies how much cash flow investors would receive for every dollar they invest in the company. Clorox’s dividend yield of 2.3%, based on the share price as of March 22, is greater than consumer product group peers like Colgate-Palmolive (CL) and Church & Dwight (CHD), which have dividend yields of 2.2% and 1.6%, respectively. However, Procter & Gamble (PG) and Kimberly-Clark (KMB) each generate a superior dividend yield of 2.9%.
Trend to continue
Clorox has been increasing its dividend at a healthy rate in the past, which the company is expected to maintain in fiscal 2017. Fiscal 2017 is expected to mark yet another year of significant cash returns for shareholders, as the company projects free cash flow to be 10%–12% of total sales.
Notably, as a dividend aristocrat, Clorox is included in the holdings of the SPDR S&P Dividend ETF (SDY), which invests in companies that have grown their dividends for at least 20 consecutive years. SDY has around 1.2% of its holdings in Clorox.
Now let’s take a look at the analyst ratings for Clorox.