Clorox brands make it a defensive stock, one that can weather downturns in the economy and the market, but might lag in the recovery. But the value of its brands have been diminished in both market share and in value.
In 2012, Clorox was 94th on the list of the world's 100 most powerful brands. Today it doesn't appear at all. Brand consultancy Interbrand also annually ranks the value of a brand as an asset to a company. While other household consumer goods appear on the list, including Gillette (No. 18) and Colgate (50), Clorox does not and never has.
In its latest quarter Clorox reported its market share decreased 0.2 points in several categories compared to the year-ago quarter as competition grew, particularly in cat litter and water filtration. It did gain share in charcoal, laundry, and home care, which remain its largest segments. And though it continues to dominate the bleach market where it still owns half of all the share, but it lost volume growth from last year.
3. An increasing payout ratio.
With a payout ratio that recently jumped to 74%, Clorox pushes up against what is often viewed as a ceiling for a safe payment.
Calculated by dividing the amount of dividends paid out by a company's net income, the payout ratio is a key metric used to determine whether a dividend is sustainable. Lower ratios are typically preferred to higher ones, and where a payout ratio over 100% means the company is paying out more in dividends than it makes in profits, one below 75% indicates there's generally room for both organic share price appreciation and future dividend growth.
4. Valuation is getting pricey.
Clorox trades at a fairly lofty 26 times estimated 2015 earnings, though its dividend yields 2.9%, which means it's still a better bet than its own bonds due in 2017 that are yielding 1.5% or five-year U.S. Treasurys that are yielding 1.6%.
While the latest increase of 4% is below its average five- and 10-year averages, analysts anticipate its earnings will grow at around 5.5% over the next five years, and that puts the hike more in line with that long-term rate, though still low.
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