Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. However, when you're an income investor, your primary focus is generating consistent cash flow from each of your liquid investments.
While cash flow can come from bond interest or interest from other types of investments, income investors hone in on dividends. A dividend is that coveted distribution of a company's earnings paid out to shareholders, and investors often view it by its dividend yield, a metric that measures the dividend as a percent of the current stock price. Many academic studies show that dividends account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.
Clorox in Focus
Clorox (CLX) is headquartered in Oakland, and is in the Consumer Staples sector. The stock has seen a price change of 37.04% since the start of the year. The consumer products maker is currently shelling out a dividend of $1.11 per share, with a dividend yield of 2.11%. This compares to the Soap and Cleaning Materials industry's yield of 2.1% and the S&P 500's yield of 1.66%.
Taking a look at the company's dividend growth, its current annualized dividend of $4.44 is up 4.7% from last year. Clorox has increased its dividend 4 times on a year-over-year basis over the last 5 years for an average annual increase of 8.36%. Future dividend growth will depend on earnings growth as well as payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. Clorox's current payout ratio is 58%. This means it paid out 58% of its trailing 12-month EPS as dividend.
CLX is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2020 is $7.75 per share, with earnings expected to increase 5.30% from the year ago period.
Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. It's important to keep in mind that not all companies provide a quarterly payout.
High-growth firms or tech start-ups, for example, rarely provide their shareholders a dividend, while larger, more established companies that have more secure profits are often seen as the best dividend options. Income investors must be conscious of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, CLX is a compelling investment opportunity. Not only is it a strong dividend play, but the stock currently sits at a Zacks Rank of 3 (Hold).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
The Clorox Company (CLX) : Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research