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Clorox: Why Investors Should Pass On This Dividend Aristocrat

Published Fri, 08 Feb 2019 07:38:40 -0500 on Seeking Alpha

After a rough start to 2018, Clorox Company (CLX) finished strong. Shares declined at the start of the year from $146 to just $115, but since the bottom was made, Clorox has been on a roll. Today, shares trade for $154 after a well-received Q2 earnings report, albeit off of their recent highs at $168. Investors seem to believe Clorox has entered a new stage of growth, based upon the reaction to the earnings report, but we have a different view.
Despite Clorox’s membership in the exclusive Dividend Aristocrats, a group of S&P 500 stocks with at least 25 years of consecutive dividend increases, we rate Clorox a sell. The dividend is certainly very safe, but the stock has been overpriced by investors.
Overview Of Recent Events
Clorox is a manufacturer and marketer of consumer professional products, spanning a wide array of categories from charcoal to cleaning supplies to salad dressing. The company’s well-known brands include Brita, Hidden Valley, Kingsford, Glad, and Pine-Sol, among many others. Clorox was founded in 1913 and in the 106 years since, it has grown to a market capitalization of $20 billion on over $6 billion in annual revenue.
Quite impressively, Clorox obtains more than 80% of its total revenue from brands that are dominant in their respective markets, achieving either #1 or #2 status in them.

Source: Q2 earnings presentation, page 8
Clorox is, unsurprisingly, dominant in various cleaning products categories. Indeed, Clorox is... Read more

Stock name Last trade   P/E Earnings/Share Dividend/Share Dividend yield
CLOROX 160.90   25.4 6.34 4.24 2.70