Clorox's charcoal brand Kingsford continues to light a fire under sales. The division accounts for almost 10% of revenues all by itself. Image: Kingsford.

Clorox (NYSE:CLX) has an enviable record as a dividend stock, returning value to shareholders for 46 consecutive years. In fact, it's such a consistent payer that it has raised the payout every year since 1977. At present, the company pays an annual dividend of $2.96 per share and boasts a 2.9% dividend yield.

But chasing yield isn't the way to pursue a stock, and smart investors know they must look at the business's underlying fundamentals. Here are two things Clorox dividend investors need to know about the health of its business today.

A global portfolio of leading brands
Clorox brands cover a broad range of household needs. In addition to its namesake bleach that owns more than half the market, more than 80% of the products in its portfolio are the top one or two brands in their respective niches.

Glad trash bags, for instance, have a 32% share of the market, ahead of Hefty, but behind private-label trash bags that hold a 42% share. Kingsford charcoal owns the market with a 73% share, while store-brand charcoal is second, with 20%. Its Hidden Valley salad dressings beat out Kraft (NASDAQ:KRFT.DL) dressings, laundry booster Clorox 2 is second to OxiClean, and its Clorox brand kitty litter comes up second to Nestle's (OTC:NSRGY) Tidy Cats from Purina.

One of the missing pieces of the puzzle was the inability of Clorox bleach to retain its market share. Image: Clorox.

Yet, even its best-known brand has lost its grip. Clorox bleach had a 65% market share as recently as the end of 2011. It compacted the product's presentation, reducing its size to boost profitability -- there was a 500 basis point margin improvement by the end of 2013 -- but it quickly lost share by doing so. Its share fell to 58% last year. However, it's been gaining back share slowly during the past few quarters .

While Clorox lost a few tenths of a percent share in several categories, it continued to gain share in charcoal, laundry, and home care, which remain its largest segments.

Its payout ratio has continued to rise
Calculated by dividing the amount of dividends a company pays out by its net income, the payout ratio determines whether a dividend is sustainable. Lower ratios are typically preferred to higher ones, and where a payout ratio higher than 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.

Clorox's payout ratio has risen from a comfortable 64% this past summer to 74% in its fiscal 2015 first quarter. That has it bumping up against what is often viewed as a ceiling for a safe payment.

CLX Chart

CLX data by YCharts.

While dividends cost Clorox $95 million a quarter, and it has only $355 million in cash and equivalents, it continues to generate positive cash flows each quarter, some $243 million in the first, or 36% more than a year ago. With capital expenditures limited, it had $214 million in free cash flow, which sufficiently covers its dividend needs.

A clean slate
The rate of growth in Clorox's dividend slowed appreciably, rising just 4%, which is well below the 11% rate of increase it's averaged during the past 10 years, or even the 8% annual increases it's achieved during the last five.

The company had some operational issues in recent periods causing it to stumble, but they have been worked out, and Clorox is slowly gaining traction once more. For dividend investors, all of these things matter because they could affect the company's ability to meet its dividend obligations to shareholders down the road.

Clorox has a stable history of paying dividends and raising the payout each year. It also has a stable of household names that are almost synonymous with their categories. As a result, this should be seen as a safe dividend stock investors can trust today.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.