Clorox Dividend Stock Analysis (CLX)
Current Dividend: $3.36
Dividend Yield: 2.5%
Cash Dividend Payout Ratio: 69%
Market Capitalization: 17 B
Enterprise Value: 19 B
Sector: Consumer Defensive
Industry: Household & Personal Products
The Clorox Company is a premier manufacturer and marketer of consumer and professional products of which 80% hold the top 1 or 2 market share position. Operating in more than 100 countries with over 7,700 employees, the company latest annual revenues exceed 5.6 billion.
The company has four reportable segments:
Cleaning (1.8 Billion Sales) 32%
The cleaning segment includes brands such as Clorox, Formula 409, Liquid Plumber, Tilex, S.O.S, Green Works, and Pine-Sol, Handi-Wipes, Oxi Magic, and Wash’n Dri.
Household (1.8 Billion Sales) 32%
The fastest growing segment (5% growth) includes Kingsford and Match Light charcoal, Glad plastic bags, wraps, containers, Fresh Step, Scoop Away, and Ever Clean litter brands,
Lifestyle (1.0 Billion Sales) 17%
The Lifestyle segments includes sauces and dressing sold under the KC Masterpiece, Soy Vay, and Hidden Valley brands; water filtration systems and filters under the Brita brand; and natural personal care products under the Burt’s Bees brand.
International (1.1 Billion Sales) 19%
Many of the same products sold in the United States, plus additional brands for various countries, are sold in the International segment. Company products are manufactured in more than a dozen countries and sold in more than 100 countries.
Clorox has significant competitive advantages including strong brands, economies of scale, outstanding management, an adapting product line, and barriers to entry. Economies of scale allow Clorox to keep margins above average. Profitable long term relationships with retailers translates into loyalty and prime shelf space that makes it harder for competitors to grab market share.
The household and personal products industries are mature markets with a great deal of competition. Low growth rates make it difficult to grow earnings without adding new products through innovation or acquisition.
Nearly 50% of Clorox business is derived from five retailers including approximately 25% coming from Wal-Mart alone. This means the company has limited pricing power because retailers are squeezing suppliers for lower prices in this competitive environment.
Clorox is bringing new products to market that are considered value-added as well as extensions to current product lines. New Bert’s Bees Face and Body products, Control Bleach Crystals, Pump N’ Clean Products, Light Weight Charcoal, OderShield and Force Flex bags, ScrubSingles, Triple Action Dust Wipes, Urine Remover, and Clorox Pool Products are examples of how Clorox is using opportunities to grow revenues.
A major threat is private label growth as retail customers become more savvy shoppers and price conscience. The competitive environment allows for retailers to ask for lower prices and consumers to trade down to cheaper alternatives.
Dividend Analyzer Checklist
(updated January 2017)
Dividend Safety Score (10/33 points)
Dividend Per Share (ttm): $3.11
Dividend Payout Ratio (ttm): 62%
Dividend Per Share (10 Year Growth): 10.4%
Cash From Operations (CFO) Per Share (ttm): $6.08
CFO Dividend Coverage (CFO / DPS): 2.0 (0/6 points)
Free Cash Flow (FCF) Per Share (ttm): $4.54
FCF Dividend Coverage (FCF / DPS): 1.5 (3/6 points)
Net Financial Debt: $1999
Total Assets: $4466
Net Financial Debt / Total Assets: 45% (3/12 points)
Net Financial Debt to EBITDA (ttm): 188%
Total Liabilities to Assets Ratio (Qtr.): 94%
Piotroski Score (1-9) (TTM): (4/9 points)
Profitability & Growth Score (18/33 points)
Revenue (10 Year Growth) *CAGR > 4.14%: 2.2% (0/4 points)
EPS Basic Cont. Operations (10 Year Growth) CAGR > 4.14%: 5.5% (4/4 points)
Cash From Operations (10 Year Growth) CAGR > 4.14%: 4.1% (0/6 points)
Operating Earnings Yield (ttm): 6.6% (3/7 points)
Net Income (ttm): $655 M
Gross Profit (ttm): $2613 M
Total Assets: $4466
Gross Profitability Ratio = GP / Total Assets: 59% (11/12 points)
Cash Return On Invested Capital (CROIC)(tttm): 24%
Return on Invested Capital (ROIC): 26%
Return on Invested Capital (ROIC) (5 Year Median): 22%
Return on Invested Capital (ROIC) (10 Year Median): 21%
Valuation Score (13/34 points)
Free Cash Flow Yield (ttm): 3.7% (4/9 points)
EV to EBIT (ttm): 16.5 (4/9 points)
EV to EBITDA (ttm): 14.3 (3/9 points)
PE10: 28.1 (2/7 points)
Price to Sales Ratio (ttm): 2.6
Price to Book Value: 50.6
Price to Earnings Ratio (P/E) (ttm): 22.9
TOTAL POINTS – (41/100) (50 is an average score)
*Compound Annual Growth Rate (CAGR)
**A Compound Annual Growth Rate of 4.14% = a 50% gain over 10 years.
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(updated January 2017)
Clorox (CLX) is ranked #177 (out of 246) overall and #29 (out of 34) in the Consumer Defensive sector by the Dividend Analyzer.
Clorox is currently a below average opportunity due to very sluggish growth, above average debt, and a high stock valuation. AVOID
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