Friday, March 28, 2008

Clorox (CLX) Dividend Analysis

The Clorox Company manufactures and markets a range of consumer products.
It is a dividend aristocrat as well as a component of the S&P 500 index. Over the past 10 years this dividend growth stock has delivered an annual average total return of 7.20 % to its shareholders. At the same time company has managed to deliver an impressive 13.40% average annual increase in its EPS.

Annual dividend payments have increased over the past 10 years by an average of 9% annually, which is less than the growth in EPS. A 9% growth in dividends translates into the dividend payment doubling almost every 8 years. If we look at historical data, going as far back as 1987, CLX has actually managed to double its dividend payments every seven years. This is because the company had a faster dividend growth rate in the 1980’s and early 1990’s.

If we invested $100,000 in CLX on December 31, 1997 we would have bought 6991 shares (Adjusted for 2:1 stock split in August 1999). Your first dividend payment would have been $403.20 in January 1998. If you kept reinvesting the dividends though instead of spending them, your quarterly dividend payment would have risen to $1219.60 by October 2007. For a period of 10 years, your quarterly dividend income has increased by 150 %. If you reinvested it though, your quarterly dividend income would have increased by 199%.

The dividend payout has remained below 50% since 2003. A lower payout is always a plus, since it leaves room for consistent dividend growth minimizing the impact of short-term fluctuations in earnings.

I think that CLX is attractively valued with its low price/earnings multiple of 17 and above-average yield at 2.80%. (which is higher than the 2.03% yield on the SPY)

Disclosure: I own shares of CLX

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