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Stock Analysis of Clorox

The Clorox Company manufactures and markets consumer and professional products worldwide. It operates in four segments - Cleaning, Household, Lifestyle and International. This dividend champion has paid dividends since 1968 and has increased them for 36 years in a row.

The company’s latest dividend increase was announced in May 2013 when the Board of Directors approved a 10.90% increase in the quarterly annual dividend to 71 cents /share. The company’s peer group includes Procter & Gamble (PG), Colgate Palmolive (CL), and Kimberly Clark (KMB).

Over the past decade this dividend growth stock has delivered an annualized total return of 10.10% to its shareholders.

The company has managed to deliver a 6.40% average increase in annual EPS over the past decade. Clorox is expected to earn $4.46 per share in 2014 and $4.77 per share in 2015. In comparison, the company earned $4.31/share in 2013.

The annual dividend payment has increased by 10.70% per year over the past decade, which is higher than the growth in EPS. This was accomplished through the expansion of the dividend payout ratio. Future growth will be limited by any growth in earnings per share.

An 11% growth in distributions translates into the dividend payment doubling every six and a half years on average. Since 1986, Clorox has been able to double dividends almost every seven years on average.

The dividend payout ratio increased from 42% in 2004 to almost 59% in 2013. A lower payout is always a plus, since it leaves room for consistent dividend growth minimizing the impact of short-term fluctuations in earnings.

The company’s Return on Assets has decreased slightly over the past decade. Rather than focus on absolute values for this indicator, I generally want to see at least a stable return over time.

Currently, the stock is fairly valued, as it trades at 19.50 times forward 2014 earnings and yields 3.30%. I am analyzing the company because I believe it is quality dividend growth stock, which will be a very good investment on dips below $86-$87.

Full Disclosure: Long CLX, PG, KMB, CL

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This article was written by Dividend Growth Investor. If you enjoyed this article, please subscribe to have future articles emailed to you [Email] or follow me on Twitter [Twitter].