Amid the prevailing economic uncertainties, investors are always
on the look out for the best possible return from stocks in their
portfolio. In a bid to boost shareholder return,
) recently increased its quarterly dividend by 6.7% or 4 cents to
64 cents per share. Earlier, the company used to pay 60 cents per
The increased dividend will be paid on August 10, 2012 to the
shareholders of record as of July 25, 2012. The annualized dividend
yield based on the increased dividend and current stock price is
Previously, on May 18, 2011, Clorox raised its dividend to 60
cents from 55 cents per share, reflecting an increase of 9%.
Dividend increase has emerged as a trend among companies having
a stable cash position and healthy cash flow. The dividend hike not
only enhances shareholders' return but also raise the market value
of the stock.
Following the same trend, Clorox raised its dividend on the
anticipation of higher free cash flow generation. Clorox expects to
generate free cash flow of about 9% to 10% of sales during fiscal
2012 and 2013. Moreover, the company's assertion of increase in
dividend clearly signifies the ability to generate liquidity and
its potential to improve in the long-run.
Recently, the company posted better-than-expected results for
the third-quarter of 2012. The quarterly earnings came in at $1.05
per share compared with $1.03 per share in the comparable period
last year. The quarterly earnings also beat the Zacks Consensus
Estimate of $1.03 per share.
During the quarter, the company's earnings benefited from the
ongoing cost-saving initiatives and price increases, while higher
raw material, manufacturing and logistics costs, poor product and
country mix, and spending on Information Technology (IT) systems
and research & development (R&D) facilities were minor
Looking ahead, the company adjusted its annual sales growth
guidance for fiscal 2012 to 4%, against the company's previous
guidance range of 2% - 4%. The revised guidance reflected
improvement in the U.S. categories as well as robust results on the
back of innovation, price increase and merchandising initiatives.
Clorox continues to anticipate annual earnings of $4.00 to $4.10
per share in fiscal 2012.
Additionally, the company also provided its fiscal 2013
guidance, projecting sales growth in the range of 2% - 4%. The
company expects cost containment efforts and price hikes to offset
increasing commodities and other manufacturing costs. The company
anticipates fiscal 2013 earnings per share to be in the range of
$4.20 - $4.35.
Clorox making intensive capital investments in information
technology systems and capabilities, particularly in the
international market and R&D facilities to boost productivity
while providing platforms for growth, product innovation and cost
savings. The company believes that these initiatives will begin
delivering benefits later in fiscal 2014 and beyond.
Clorox's financial performance may be substantially affected in
the short term due to its significant presence in international
market (approximately 21% of revenue), which exposes it to
unfavorable foreign currency translations, economic or political
instability and other governmental actions on trade and
repatriation of foreign profits.
Most of the company's products compete with other widely
advertised brands within each product category and private label
brands and generic non-branded products of grocery chains and
wholesale cooperatives in certain categories, which typically are
sold at lower prices. The main competitors of Clorox are
Procter and Gamble Company
Therefore, the shares carry a Zacks #4 Rank implying short-term
'Sell' rating. We remain Neutral on a long term basis.
COLGATE PALMOLI (CL): Free Stock Analysis
CLOROX CO (CLX): Free Stock Analysis Report
PROCTER & GAMBL (PG): Free Stock Analysis
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