Clorox Could Brighten Up Your Portfolio (CLX)

There are a number of metrics which investors should look at in evaluating stocks in this precarious market. Investors should look to buy stock in companies that have a quality and defensive business model, a history of creating shareholder value, offer an attractive dividend yield and trade at a reasonable valuation. Clorox (NYSE: CLX) fits these requirements.

The company has a very stable and defensive business model. The Clorox Company (CLX) is a manufacturer and marketer of consumer and institutional products. These include its namesake bleach and cleaning products, Armor All and STP auto-care products, Fresh Step and Scoop Away cat litter, Kingsford charcoal, Hidden Valley and K C Masterpiece dressings and sauces, Brita water-filtration systems, Glad bags, wraps and containers, and Burt’s Bees natural personal care products.

Second, the company's management has a history of creating value for shareholders. Over the last 52-weeks, the stock has gained 13%. Over the last 5 years, CLX is up more than 15%, and on the 10-year chart the shares have appreciated 85%. These may not be fantastic gains, but they are far superior to what the wider market has provided.

CLX offers a very attractive 3.32% dividend yield at current levels. This far exceeds what Treasuries are currently yielding, and barring an unforeseen disaster, the company will likely be able to consistently increase these payments.

Clorox's valuation is reasonable, although not cheap. The shares trade at a trailing P/E of 15.62, a forward P/E of 13.33 and a PEG ratio of 1.40. Given the company's high quality and entrenched defensive business model, a case can be made that the current valuation is quite attractive.

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