Disinfect Your Portfolio With Clorox Strength Performance

Clorox, More Than Just A Disinfectant

Consumer staples products are flying off the shelves in response to the global coronavirus pandemic. Because of it, companies from Colgate-Palmolive (CLP) to General Mills (GIS), Conagra (CAG), Kimberly-Clark (KMB), and Pepsico (PEP) are reporting strong sales, providing positive guidance, and paying their dividends with ease. Today’s news bring to light another one of these great dividend companies and one you may have overlooked.

Clorox (CLX) is a big name in disinfectants and cleaners but you may not have known the company is a diversified consumer staples behemoth. Its leading brand is Clorox, the #1 choice of household disinfectant today, you probably have at least one of these products in your home right now. Other names include Formula 409, Kingsford Charcoal, Fresh Step (kitty liter supplies), Pine-Sol, Liquid Plumbr, Glad, and Hidden Valley (yes, the Ranch Dressing people).

Along with the diverse array of necessary everyday household cleaners and supplies, Clorox has an international footprint with operations in virtually all major markets. The takeaway here is that Clorox commands some of the markets leading brands and sells them in all corners of the world. This company is as blue-chip as they come.

The First Quarter Results Are Strong, Very Strong

The Clorox 1Q earnings report is one of those Goldilocks reports that we all like to see. The headline figures for revenue and earnings are both strong, they both beat consensus, and are both backed up by the internal data. Regarding revenue, revenue grew nearly 15% to outpace the consensus by 500 basis points. Wow. On the bottom-line, GAAP EPS of $1.89 blew past consensus by nearly a full quarter. Double-wow.

Within the report, organic sales rose more than 17% for the quarter on high demand for Clorox cleaning products and strong demand for most other product segments. Demand was high in all operating regions as well, and the company is expecting demand to remain strong for the foreseeable future. The pandemic is far from over and, even when it is, folks are going to want their sanitation products.

In addition to the robust demand, Clorox also experienced a robust increase in margins. Margins improved by 330 basis points due to double-digit volume growth and an effective cost-saving strategy. Looking forward, the company expects these trends and demands to stay stong and raise guidance because of it. The company is now projecting 2020 organic growth in the range of 4% to 6%, a range above the current consensus of 3.8%.

The Dividend, Debt, And Cash Flow Are Impressive

Looking at the dividend, Clorox is one great dividend payer. The company is not a Dividend King nor even a Dividend Aristocrat but it’s not far off. With 18 years of increases, it’s well on its way to Aristocrat status and the outlook is good Clorox will hit the 25-year mark. At today’s prices the yield is only about 2.27% but that is mitigated by its safety and outlook for growth.

All too many S&P 500 companies have or will suspend their payments to weather this storm but Clorox is not one of them. The expected payout ratio for 2020 was a well-managed 65% before today’s news. Now, the ratio could easily fall below the 60% mark putting Clorox in good position to produce a large increase when it announces the next distribution. That announcement is expected to come within the next couple of weeks. Looking at the balance sheet, cash flow and debt are not a problem.

The Technical Outlook: What Correction? Uptrend In-Play

My first look at the Clorox chart was one of confusion because I wasn’t sure what I was looking at. The problem is that I didn’t see a correction where I thought there should have been one. Basically, when I went to this chart I was expecting a Vee-looking-Bottom akin to what I’ve been seeing in the other consumer staples stocks. What I see here is an uptrend on the brink of retesting the recently set all-time highs and a thoroughbred stock leading its peers by several lengths. If Clorox isn’t a good buy, I don’t know what is.