24/7 Wall St. Insights

• Clorox Co. (NYSE: CLX) just rewarded its shareholders again with a quarterly dividend.
• As a Dividend Aristocrat, it is the epitome of a steady and reliable stock, and it is popular with hedge funds.
• Also: 2 Dividend Legends to Hold Forever.

Clorox Co. (NYSE: CLX) is rewarding its shareholders once again with a quarterly dividend of $1.22, payable on Thursday, Nov. 7. The company reported a surprise profit in the most recent quarterly report, and it is due to post fiscal first-quarter results shortly. The dividend payment underscores the management’s commitment to delivering consistent value to investors.

Why Investors Like Dividends

Investors favor dividend stocks for two main reasons. The first is that they offer enticing total return potential. Total return is a comprehensive measure of investment performance that includes interest, capital gains, dividends, and distributions realized over time. In other words, the total return on an investment or a portfolio consists of income and stock appreciation. It is one of the most effective ways to boost the prospects of overall investing success.

Dividend stocks can also provide investors with a steady, reliable stream of passive income. Passive income is money that is earned with little to no ongoing effort, usually from assets that generate cash flow. This income can come from a variety of sources, including stock dividends. Generating passive income is a desirable financial strategy for those seeking to diversify their income streams or achieve financial independence.

A Dividend Aristocrat

Clorox is the epitome of a stable and dependable stock. It has not only paid out but has increased its dividend annually for 48 years. That is well more than the 25 straight years of growth it takes for an S&P 500 member to become a Dividend Aristocrat. Moreover, it is poised to become a Dividend King, a member of that exclusive group of stocks that have at least 50 consecutive years of dividend growth.

Since 2000, Clorox’s dividend has grown about 510%. The current dividend yield is 3.0%, which is better than the average yield of the consumer discretionary sector. The share price has grown by almost 220% since 2000 as well, offering investors some growth along with the income.

Clorox, the Company

The company engages in the manufacture and marketing of consumer and professional products worldwide. Besides its namesake, its well-known and highly regarded brands include Pine-Sol, Liquid-Plumr, Fresh Step, Glad, Kingsford, Brita, Hidden Valley, and Burt’s Bees. It sells its products primarily through mass retailers; grocery outlets; warehouse clubs; dollar stores; home hardware centers; drug, pet, and military stores; third-party and owned e-commerce channels; and distributors, as well as directly to consumers.

Its headquarters are in Oakland, California. The company was founded in 1913, the first commercial-scale liquid bleach manufacturer in the United States. Clorox first went public in 1928. Major competitors include Colgate-Palmolive Co. (NYSE: CL), Church & Dwight Co. Inc. (NYSE: CHD), and Procter & Gamble Co. (NYSE: PG).

The company recently completed the divestiture of its Better Health Vitamins, Minerals and Supplements business, part of its commitment to continue evolving its portfolio to reduce volatility and accelerate sales growth. Earlier in the year, it divested operations in Argentina, Paraguay, and Uruguay. Clorox was ranked number one on Barron’s 100 Most Sustainable Companies list for two consecutive years.

Clorox, the Stock

The share price has grown about 18% in the past two years, underperforming the S&P 500. In the past 90 days, the stock is up nearly 19%, while the S&P 500 is more than 6% higher. Shares hit a multiyear high of $169.09 last month. That is higher than the current mean price target. Post-earnings target changes by analysts could change that picture. JPMorgan reiterated its Neutral rating last week. The current consensus recommendation is to Hold shares.

The stock remains popular with hedge funds. Institutional investors hold about 84% of the shares. Vanguard is a beneficial owner, and BlackRock and State Street have notable stakes as well. About 123.3 million shares, or around 3% of the float, are held short. Note that one executive recently parted with some shares.

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