To earn the title of Dividend Aristocrat, a company must build a streak of at least 25 straight years of annual payout increases. While that kind of track record is no guarantee that a company will keep the hikes coming, it does show a commitment to do so. However, when conditions change -- and the COVID-19 pandemic has certainly made for some changes -- companies may have to reevaluate their financial priorities and abilities. 

Both Cardinal Health (CAH -1.24%) and Clorox (CLX -1.95%)have been struggling of late. And while each has raised its dividend payouts for more than 30 years in a row, investors may now be worried about the future of those streaks.

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Cardinal Health

Cardinal Health distributes pharmaceuticals, produces a wide variety of healthcare products, and provides services across its industry. Its business is relatively stable, but after it released its fiscal fourth-quarter results on Aug. 5, its stock crashed. Although the company's revenue for the period ending June 30 increased by 16% year over year to $42.6 billion, the bottom line was a big problem: Its adjusted diluted earnings of $0.77 per share came in well below the $1.20 per share that analysts were expecting.

One reason for that underperformance was a $197 million charge related to a reserve for inventory due to COVID-19. Cardinal also recorded $149 million in expenses related to opioid lawsuits.

Management admitted that they were disappointed with the period's results. However, they see $250 million in cost-saving opportunities for fiscal 2022, so there's reason to hope that future quarters will look much better.

For income-focused investors, the good news is that the dividend still looks safe. The company's quarterly payout of $0.4908 per share is well below its adjusted EPS.  And its free cash flow of more than $2 billion over the past four quarters has given it more than enough to cover the $573 million in dividend payments that it made during that time.

At current share prices, Cardinal Health's dividend yields 3.8% -- far better than the S&P 500's average yield of around 1.3%. The company raised its payout this year by a modest 1%, but given the room that it has in its cash flow, there's little reason to doubt that raises will continue.

Cardinal Health is down 12% in the past month (while the S&P 500 has gained 2%), meaning that now may be a great time to buy this healthcare stock at a reduced price and lock in the higher yield.


Clorox stock also tumbled after it reported its latest earnings results. The company's cleaning products were in high demand during the early stages of the pandemic. But as the evidence became clearer that COVID-19 transmission is more an airborne threat than a surface threat, the surge in demand for disinfectants eased. That, naturally, has resulted in weaker sales for Clorox. Revenues fell 9% year over year to $1.8 billion in its fiscal fourth quarter, which ended June 30. And its diluted EPS of $0.78 was just one-third of the profit it reported in the prior-year period.

Facing both inflationary pressures and softening demand, the company forecasts that for fiscal 2022 (which started on July 1), its EPS will land in the range of $5.05 to $5.35. Even if it hits the high end of that range, the company's bottom line would be down by more than 4% from the $5.58 EPS it reported for fiscal 2021.

Clorox raised its quarterly dividend earlier this year from $1.11 to $1.16 -- or $4.64 on an annual basis. As such, its payout remains well below the low end of its EPS guidance for the coming fiscal year. On a cash basis, things also look good: The company's free cash flow totaled $945 million over the past 12 months versus the $558 million it paid in dividends. That makes it likely that the company's streak of 40-plus years of dividend hikes will continue.

In the past month, Clorox stock has fallen by more than 6%; at current share prices, it now yields 2.7%. For income investors, it remains a good portfolio option for the long term. The company will be going up against some more great quarters from calendar 2020, so it will likely continue to underperform based on those comparisons. However, last year was highly unusual for the business. A return to more typical results shouldn't discourage buy-and-hold investors.