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The Clorox Company (NYSE:CLX) will increase its dividend on the 13th of August to US$1.16. Based on the announced payment, the dividend yield for the company will be 2.5%, which is fairly typical for the industry.
Clorox's Earnings Easily Cover the Distributions
Unless the payments are sustainable, the dividend yield doesn't mean too much. The last dividend was quite easily covered by Clorox's earnings. This indicates that quite a large proportion of earnings is being invested back into the business.
Over the next year, EPS is forecast to expand by 3.5%. If the dividend continues along recent trends, we estimate the payout ratio will be 64%, which is in the range that makes us comfortable with the sustainability of the dividend.
Clorox Has A Solid Track Record
The company has a sustained record of paying dividends with very little fluctuation. Since 2011, the dividend has gone from US$2.20 to US$4.64. This implies that the company grew its distributions at a yearly rate of about 7.7% over that duration. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.
We Could See Clorox's Dividend Growing
Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. We are encouraged to see that Clorox has grown earnings per share at 7.1% per year over the past five years. The company is paying a reasonable amount of earnings to shareholders, and is growing earnings at a decent rate so we think it could be a decent dividend stock.
Clorox Looks Like A Great Dividend Stock
Overall, a dividend increase is always good, and we think that Clorox is a strong income stock thanks to its track record and growing earnings. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All in all, this checks a lot of the boxes we look for when choosing an income stock.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. To that end, Clorox has 2 warning signs (and 1 which doesn't sit too well with us) we think you should know about. We have also put together a list of global stocks with a solid dividend.
This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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