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Clorox to Reward Shareholders with a 4% Dividend Hike - Analyst Blog

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The Clorox CompanyCLX , known for its shareholder-friendly moves, has once again come forward to reward shareholders with an annual rise in its dividend rate. The company raised its quarterly dividend by nearly 4% or 3 cents to 77 cents per share from 74 cents per share.

The new dividend will be paid on Aug 7, 2015, to shareholders of record as of Jul 22, 2015. The hike in dividend now brings the company's annualized dividend rate to $3.08 per share. Based on the current stock price, the increased dividend would result in a yield of 2.9%.

Previously, on May 12, 2014, Clorox had raised its dividend by 4.2% to 74 cents from 71 cents per share.

Clorox has from time to time been enhancing shareholder return. The company has a track record of consistently raising dividends since 1977. Taking a decade-long view, the company has successfully increased its dividend from 22 cents paid in Jan 2003 to 77 cents recently.

We believe that Clorox's consistent dividend payments and increments reflect the growth potential of the company's earnings as well as its cash flow generation capabilities.

And yet, Clorox's third-quarter fiscal 2015 earnings were disappointing on account of higher selling & administrative expenses, unfavorable exchange rates, increased manufacturing and logistics expenses and incremental investments made to build demand. However, the impact was partly offset by enhanced sales, higher prices and cost-saving initiatives. Commodity costs remained flat during the quarter.

This Zacks Rank #3 (Hold) company's third-quarter earnings came in at $1.08 per share, missing the Zacks Consensus Estimate of $1.10 and declining 5.3% from the year-ago comparable quarter.

However, net sales climbed nearly 2.6% to $1,404 million from $1,366 million in the year-ago quarter, mainly driven by increased prices, higher volumes and favorable mix, partially offset by unfavorable currency effects. On a currency neutral basis, revenues increased 5% in the quarter. Moreover, Clorox's sales surpassed the Zacks Consensus Estimate of $1,376 million.

On the other hand, Clorox ended the quarter with cash and cash equivalents of $378 million and long-term debt of $1,796 million. During the quarter, the company generated $481 million of net cash from operations as against $444 million in the same period last year.

On the strength of its sales results, the company raised its sales growth guidance for fiscal 2015 to the range of 1-2% from a 1% increase projected earlier. This guidance includes a negative impact of over 2% from currency headwinds. Further, the company raised its fiscal 2015 earnings estimate to $4.45-$4.55 per share from $4.40-$4.55 per share expected earlier.

Other companies, which recently increased their dividends, include Whirlpool Corp. WHR , by 20% to 90 cents; Costco Wholesale Corp. COST , by 12.7% to 40 cents; and General Motors Company GM , by 20% to 36 cents.

We believe that dividend hikes not only enhance shareholder return but raise the market value of the stock as well. Through dividend increases, companies persuade investors to either buy or hold the scrip instead of selling them. Looking ahead, Clorox remains confident of its growth potential, suggesting enhanced value for shareholders via dividend payout.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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