If you own Procter & Gamble (PG 0.87%) shares, don't sweat it. You're sitting on one of the most reliable dividend-paying consumer staples names the market has to offer. There's a reason P&G is the biggest name in the business.

If you've got room for a new consumer goods name in your portfolio, however, you may want to fill that gap with The Clorox Company (CLX 0.15%). It's considerably smaller, but growth prospects are all relative. Clorox has a clear plan for the future, and room to grow. For all of Procter's streamlining in recent years, it's still a big behemoth that spends a lot of time and resources just holding itself together.

Then there's the dividend thing.

Hand drawing upward arrow labeled Dividends

Image source: Getty Images.

Planning the work, working the plan

Yes, this is the company that owns the world's most recognizable brand of bleach. It's not just bleach, though. Clorox is also the name behind Liquid Plumr, Glad trash bags, Fresh Step kitty litter, Brita water filters, and even Kingsford charcoal, just to name a few. This diverse portfolio of consumer goods is a key reason the company's top and bottom line growth is rather involatile. Every time a consumer sets foot in a store, he or she is quite likely to purchase at least one of Clorox's products.

That's not apt to change in the foreseeable future either, if the company's newest long-term strategic plan pans out as well as its prior one did.

It's called IGNITE. Unveiled a little over a year ago, IGNITE is the framework around which Clorox will operate for the next several years. Like most such programs, Clorox's IGNITE consists of sales growth goals, vows of corporate responsibility, and promises of better profitability. Unlike too many other strategic initiatives, however, IGNITE includes specific action plans that will guide Clorox to these goals. For instance, as part of the company's aim of providing a frictionless shopping experience, it entered 2020 ready to adapt to the curve ball the COVID-19 pandemic threw at it. In 2019, only 8% of the company's sales were made online. This year, that figure has grown to 12%.

Granted, the coronavirus contagion helped. The Clorox Company was ready for more direct-to-consumer business regardless, though.

The overlooked but powerful aspect of this evolution: Clorox is really getting to know its customers, expanding its data files on individuals and groups. Among the specific actions the company has taken to drive people to its e-commerce sites (as well as to stores) to buy its products is a recently forged partnership with Alphabet's Google. Namely, Clorox is now a client of Google's data analytics platform called Looker, which allows the consumer goods outfit to quickly test new product concepts. Looker's insights may have helped prompt the creation of Clorox's "Glad to be Green" trash bag line in Australia and New Zealand earlier this year. Clorox had to know recycled trash bags would be a marketable concept in that market in order to successfully launch the product.

It may seem trivial on the surface, but don't dismiss the importance of a strategic initiative that's actually built around specifics. For too many organizations, a "plan" ends up being little more than a collection of slogans and wishes that end up meaning very little.

Numbers talk

A strategic framework makes for great storytelling, and may even improve a company's fiscal performance. But it means nothing to dividend seekers if they're not able to participate in that progress.

That's not going to be a problem.

Clorox's IGNITE initiative may only be expected to drive annual sales growth of 2% to 4%. It's expected to widen pre-tax and pre-interest earnings margins by 25 to 50 basis points, though, and widen free cash flow to between 11% and 13% of sales. That ultimately translates into more income that can be passed along to shareholders in the form of dividends, or reinvested in the company's well-grounded plan to drive even more earnings growth.

And the company's been doing pretty well on that front anyway. The current annualized dividend payout of $4.34 per share is more than twice the $2.10 that was dished out in 2010, translating into a compound annualized growth rate of 7.5%. For perspective, Procter & Gamble's current annualized dividend of $3.16 per share has only grown an average of 5% from 2010's payout rate of $1.76. Given how both companies are yielding right around 2.25% at their current prices, new income-minded investors may ultimately experience more income growth with the smaller name.

There's also little doubt The Clorox Company can afford to keep paying its dividend. Only a little over half of its per-share earnings are passed along directly to shareholders as quarterly income. That leaves a mighty big cushion against any potential short-lived disruption.

Clorox is a steady earnings grower that easily affords its dividend.

Data source: Thomson Reuters. Chart by author. (The Clorox Company's fiscal years end in June.)

Bottom line

Again, if you're a current Procter & Gamble investor, there's no particular need to make the swap. That's particularly true if there are tax implications to any sale of P&G. Both are still fine companies.

If you're liquid and itching to put some idle capital to use, though, Clorox's dividend payout profile coupled with its IGNITE plan make it the more compelling pick of the two right now.