The Clorox Company (CLX)
Current Share Price:
Valuation Verdict:
Analysis Date:
106.19
Overvalued
25/11/2025
Current Dividend Yield:
Dividend Safety Verdict:
Analyst:
4.67
Questionable
European DGI
Current Share Price:
106.19
Valuation Verdict:
Overvalued
Analysis Date:
25/11/2025
Current Dividend Yield:
4.67
Dividend Safety Verdict:
Questionable
Analyst:
European DGI
Key Data at the Time of Analysis:
Share Price
$105.64
Dividend / Share
$4.96
Dividend Yield
4.69%
Dividend Growth (Yrs)
49
5 Yr Dividend CAGR
1.79
Safety Score
55
Company Profile
The Clorox Company (CLX) is a leading U.S. consumer defensive company, offering a diverse portfolio of trusted household and lifestyle brands. Its products include well-known names like Clorox®, Brita®, Glad®, and Kingsford®, found in homes across the globe. Headquartered in Oakland, California, since 1913, Clorox focuses on championing people to be well and thrive every single day.
Country:
United States
Sector:
Consumer Defensive
Industry:
Household & Personal Products
Market Cap Type:
Large-cap (≥ $10 billion)
Payout Frequency:
Quarterly
Ticker Symbol
CLX
Dividend Policy
Clorox has a long history of providing value to its shareholders through regular dividend payments and annual dividend increases.
Source:
https://investors.thecloroxcompany.com/news/news-details/2025/Clorox-Declares-Regular-Quarterly-Dividend-of-1-24-Per-Share-ddfd49529/default.aspx
Dividend Currency:
USD
Financial Overview
5 Yr Revenue Growth
-1.00%
5 Yr EPS Growth
-6.6%
Credit Rating
Baa1
FCF Payout %
95%
EPS FWD Payout %
78%
ROCE
33.61
Recent Quarter Highlight
he latest quarter showed a sharp drop in net sales, EPS, and cash from operations due to the temporary impact of the ERP transition and related fulfillment challenges. However, management maintained the full-year outlook, albeit at the lower end of the range, suggesting confidence that free cash flow coverage will stabilize, which is key for dividend safety.
Investment Thesis
Clorox’s strong market position, where roughly 80% of U.S. sales come from number one or two brands, giving pricing power and some economic moat. Furthermore, the company is focused on margin expansion by using pricing actions, strategic cost savings, and supply chain optimization to restore profitability. Lastly, significant investments in digital capabilities and productivity enhancements could drive long-term operating efficiency and fundamental growth.
Risks / Bear Case
The high payout ratio, which is currently around 75% of earnings and nearly 95% of free cash flow. This high level limits retained earnings for reinvestment and keeps the balance sheet under pressure. Also, significant private-label penetration in core categories like bleach and trash bags could lead to sales volume pressure if cost-conscious consumers move away from Clorox products to seek cheaper alternatives. Finally, operational disruptions, such as the recent ERP transition and cybersecurity issues, can temporarily impact earnings and supplychain relationships.
Valuation
Due to the highly volatile Free Cash Flow and Net Income over the past few years, we believe the company is best assessed using the Dividend Discount Model, given its 49-year track record of dividend growth. Using the current dividend of $4.96 as a baseline and assuming 3% annual growth over the next five years (reflecting the high payout ratios), combined with a required return of 11% to account for risk, we estimate the fair value at around $62 per share. For the DCF, we used an average Free Cash Flow and Net Income of roughly $700 million over the past five years, growth rates of 6% and 4%, and an 11% discount rate with a terminal P/E multiple of 15, resulting in a value of $51.15 per share.
Price / Earnings
16.59
Forward P/Earnings
16.95
Price / FCF/share
20.44
Discounted Cash Flow
$51.15
Dividend Discount Model
$62.00
Chowder Rule
7.48%
Dividend Yield History
By comparing today’s dividend yield to its five-year range (5th–95th percentile), you can see whether the stock looks attractive from a yield perspective, while keeping in mind that an unusually high yield may also signal a potential value trap if the business is under pressure.
Disclaimer: Companies that have had a stock split in the past year (e.g., Apple) may show misleading dividend yield data. We are working to correct this.
Conclusion
We don’t see much opportunity for Clorox to grow its top-line and bottom-line due to the premium pricing of its products in a cost-sensitive environment, coupled with fierce competition from private labels. While management remains more optimistic (which would be expected), we believe the high payout ratios and relatively high debt on the balance sheet leave the company with little wiggle room. As a result, we consider the dividend questionable. Although the company has a strong track record of dividend growth and is set to become a Dividend King next year (with 50 years of increases), in our opinion, all the warning signs are flashing.
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