How to Boost Your Income by 5% – Invest in Clorox (CLX) Stock
As a dividend growth investor, I have developed a long term mindset of buy and hold. When we screen stocks for our portfolio, our goal is to find the best of the best. Those stocks are usually from companies that have a long history of constantly raising their dividends every single year.
Once we find these stocks and invest in them … we normally just sit back and watch our investment dollars go to work. Most of the time, we get an annual raise from these companies without lifting a finger. And they normally keep on coming every single year.
Sometimes these raises are small (maybe around 2%). Other times they can be double digit raises (above 20%). But most of the time, they fall in a sustainable range of 5% – 7%.
The most recent dividend increase (or raise) from a stock we have used our long term mindset of buy and hold was from The Clorox Company (CLX).
CLX Shareholders Get a 5.0% Raise
Clorox (CLX) recently announced an annual dividend increase. The company has been consistently raising annual dividends for the past 39+ years. That is pretty awesome when a company can consistently give it’s shareholders a raise every single year for almost 4 decades straight!
Company shareholders will now receive $0.84 in quarterly dividends for each share they own … instead of $0.80 paid last quarter. This increase comes in just short of our desired dividend growth rate of at least 6%.
The latest increase bumps the annual dividend for CLX up to $3.36 per share compared to $3.20 last year.
Overall, that is a 5.0% increase in dividend income.
How Much Extra Income?
We currently own 34.092 shares of CLX in our Money Sprout Index.
This latest dividend increase has pushed our 12 month forward dividend income for CLX up to $114.55, compared to $109.09 last quarter.
That is an annual dividend income increase of $5.45 – not huge but every little bit of growth counts. Add this increase to the other increases in the 30+ stocks we own and you are talking about a good amount of extra income.
This increase is simply a reminder that our dividend portfolio is constantly growing every single day … without any extra work from us..
Dividend Growth for CLX
We have owned shares of CLX for almost 6 years now … making it one of the first dividend growth stocks we invested in.
Overall, the company has shown the ability to consistently grow their dividend for several decades.
Take a look at the annual dividend payments since 2011 –
- 2011 – $2.30
- 2012 – $2.48
- 2013 – $2.70
- 2014 – $2.90
- 2015 – $3.02
- 2016 – $3.14
- 2017 – $3.28 (projected)
Note – The 2017 dividend has been adjusted to reflect a dividend increase after the second quarter.
As you can tell from the numbers above, CLX dividends have been raised consistently over the past several years.
Typically, we look for stocks with a 5-year or 10-year dividend growth rate (DGR) of 6% or higher.
Clorox doesn’t quite meet the 6% threshold for the 5 year DGR. However, if you look out to 6 years, the average is at 6.11%. Since we have owned shares for 6 years in the company … we figured the growth rates out that far.
Here are a few average growth rates for shares of Clorox –
- 1 Year DGR – 4.46% (2016 to 2017)
- 3 Year DGR – 4.19% (2014 to 2017)
- 5 Year DGR – 5.77% (2012 to 2017)
- 6 Year DGR – 6.11% (2011 to 2017)
As you can see from the dividend growth averages above … the company has been increasing their dividend at a consistent rate for the past 6 years.
Because we have been holding our shares for 6 years now, we are earning a healthy yield on cost of 4.98%.
Clorox – Buy, Sell, or Hold?
Back in July 2011, we purchased 0.68 shares of Clorox for $72.94 per share. That was the first of many monthly investments we made in the company through their Direct Stock Purchase Plan (DSPP). While not actively buying new shares (just dividend reinvestment), we still hold our Clorox stock through the company’s transfer agent – Computershare.
We continued to make monthly automated investments in the company up until March 2014. These investments ranged from $50 a month to $150 … which slowly built up our position in Clorox. This slow but effective strategy of building up shares in a company one month at a time has resulted in a sustainable income stream of $114+ per year that will continue to grow … on it’s own.
At the time of this writing, Clorox accounts for a good percentage of the Money Sprout Index. It currently makes up 4.5% of our overall portfolio. Over time, I expect our assets to slowly grow in this dividend stock through dividend reinvestment and annual dividend increases.
Since our first purchase in the company, we have earned $433.48 in dividends from CLX.
Here are a few stats from owning stock in Clorox for the past 6 years –
- Total Investment – $2,300.00
- Shares Purchased – 29.918
- Dividends Earned – $433.48
- DRiP Shares – 4.174
To date, we have earned back 18.85% of our original investment in dividends! What a cool feeling it is to earn back almost 20% of our original investment just in dividends. And all of those dividends over the years have been reinvested back into more shares of CLX stock (over 4 total) to help accelerate our income.
At the time of this writing, CLX does not meet our stock screen criteria based on the following metrics –
- Current Yield – 2.39%
- Payout Ratio – 64.52%
- P/E Ratio – 26.95
The company has a payout ratio above 60% which raises a red flag for new investment dollars. In addition, the P/E ratio is above the 20 threshold we look for at 26.95. Both of those metrics make CLX not a very attractive investment at this time.
The company does have a low current yield of 2.39%, but is slightly above our threshold of 2% that we screen for.
Based on our current allocation of CLX and the metrics listed above, we have the company as a HOLD for our portfolio.
While Clorox has been a solid piece of our dividend income foundation … there are better opportunities at this time. We will continue to hold our existing shares in the company and reinvest dividends each quarter to continue the slow growth. If at any time, the company were to cut their dividend, then we would sell our shares in the company.
Full Disclosure – At the time of this writing, we owned shares in the following stocks noted in this post – CLX. The material above is not a recommendation to buy. Please do your own research on a company before deciding to invest.