Clorox, it's really the kind of boring, cheesy and relatively simple business. The company mainly manufactures cleaning products, water filters and food products. The advantage of this type of business is that it is well protected from crises. The firm has been active since 1913, that's sustainable development... The flagship product, Clorox, has become synonymous in the US with bleach, a bit like Pampers for diapers. According to the company, 93 of its brands are #1 or #2 in their respective markets. The company is working to expand its presence in both Canada and Latin America. Despite its attempts to become a more global company, Clorox still depends on growth in the North American market for the vast majority of its sales.
Clorox offers a very interesting current yield of 3.6%, while the long-term average is 3.31%. The average annual growth rate of distributions amounts to 10.09, which is in line with the average for our portfolio. The dividend has been growing steadily for 35 years. The distribution rate is 66.30%, within the upper limit which still leaves the company some room for maneuver in the event of a difficult passage.
The stock's volatility is even lower than our portfolio average, with only 9.26%. CLX has been beating the market for many years and particularly shows its defensive virtues during chaotic stock market periods, which translates into a beta of only 0.39.
Although the fall in the dollar encourages exports and therefore turnover, the cost of foreign inputs (products that go into Clorox products) also increases. To protect itself against the volatility of foreign currencies, Clorox therefore uses various financial instruments. The stock thus displays a strong inverse sensitivity to the dollar, with a $risk of -0.75, although CLX's share price performance was not enough to offset the loss of USD/CHF over the past five years.
CLX's performance, dividend growth, and low sensitivity to stock market and currency market fluctuations mean that we still consider the stock as a purchase opportunity to this day.
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Too much advertising
Hello and thank you for your comment. I am aware of it and I am trying to optimize it while still keeping the concept of free. Thank you for your understanding and for your patience.
Hello and thank you for your site.
Clorox is certainly a quality stock, but aren't you concerned that 66%'s payout ratio could be prohibitive for investors expecting dividend growth for several more years?
Hello Martin. This could become a problem depending on the evolution of the profit indeed. The company has had a mixed year from this point of view, but I am personally confident for the future. At worst, if things were to go very badly, they might not increase the dividend in 2012, but I do not believe it at the moment. Above all, I would see them suspending or reducing it even less. A status quo of the dividend would be a warning signal to close the position, but has very little direct impact on the price, unlike a suspension or a reduction.
If you have any doubts, wait for the next quarterly announcements to see if the earnings trend is moving in the right direction, that way you will know.
Well seen! the payout ratio has fallen back to 56-57%
Thanks Martin!
Good morning,
I just have a comment about Clorex. According to the Happy Investor website that you know well, it seems that Clorex is very indebted compared to its equity…I don't know if these figures are correct. Do you have any information on these elements?
On the other hand, would you have some answers on your strong buy signal, without betraying your method 🙂 because if I believe Happy Investor, for some time there have not been too many interesting purchases to make…. Thank you in advance and have a nice day.
Hello Eric,
I don't know about equity, but indeed financial strength ratios such as current and quick ratio are less than 1. On the other hand, EBIT covers interest by a factor of eight and debt has only been falling since 2008.
That being said, CLX offers a very generous yield of 3.5%, with a decent payout ratio of 57.33%. The company's business model is very solid, as evidenced by 35 consecutive years of dividend increases. In recent years, payouts have increased at a very decent annual rate of 10.39%. With all these qualities, the stock is still quite defensive, with a volatility in CHF of only 9.38%. Even better, CLX protects well against dollar fluctuations, with a $risk of -0.77.
All these qualities are real and very concrete for the shareholder, they are directly reflected in hard currency in his bank account. They have more weight in my eyes than the debt ratio to equity alone. For this reason, CLX is a "strong buy".
It is true that the market has risen very strongly overall, too strongly even.
http://www.dividendes.ch/evaluation-du-marche/
But this is not the case for CLX, the company being poorly correlated to the market (beta=0.39).