The Clorox Company (NYSE: CLX), known for its shareholder-friendly moves, once again came forward to reward shareholders with an annual rise in its dividend rate. The company raised its quarterly dividend by 4.2% or 3 cents to 74 cents per share from 71 cents per share. This marks the company's 8th consecutive annual dividend hike since May 2007.
The new dividend will be paid on Aug 8, 2014 to shareholders of record as of Jul 23, 2014. The hike in dividend now brings the company's annualized dividend rate to $2.96 per share. Based on the current stock price, the increased dividend, results in yield of 3.4%.
Previously, on May 13, 2013, Clorox raised its dividend to 71 cents from 64 cents per share, indicating an increase of 11%.
Clorox has been enhancing shareholder return from time to time. The company has a track record of consistently raising dividends since 1977. Taking a decade-long view, the company has successfully increased its dividend by nearly 236% from 22 cents paid in Jan 2003 to 74 cents announced recently.
We believe that Clorox's consistent dividend payments and increments reflect the growth potential of the company's earnings as well as its cash flow generation capabilities.
Though Clorox's third-quarter 2014 results were slightly disappointing when compared with the Zacks Estimate, it remained encouraging based on prior-year comparisons. This Zacks Rank #3 (Hold) company's third-quarter earnings came in at $1.05 per share, missing the Zacks Consensus Estimate of $1.08 and rose 5% from the year-ago comparable quarter.
On the other hand, Clorox ended the quarter with cash and cash equivalents of $364 million. During the first three quarters of fiscal 2014, the company generated $434 million of net cash from operations against $486 million in the comparable period of fiscal 2013. The decrease was primarily due to higher tax payments and some nonqualified deferred compensation plans.
Looking ahead, the company lowered its sales and earnings forecasts for fiscal 2014. The company now expects sales to decline marginally in the fiscal instead of the 1%–2% increase projected earlier. Further, earnings per share are now expected to be $4.25–$4.35, down from earlier forecast of $4.40–$4.55.
Other companies, which recently increased dividend, include Whirlpool Corp. (NYSE: WHR) by 25% to 62.5 cents, The TJX Companies Inc. (NYSE: TJX) by 26.0% to 14.5 cents and Rockwell Automation Inc. (NYSE: ROK) by 11.0% to 52 cents.
We believe that dividend hikes not only enhance shareholder return but raise the market value of the stock as well. Through dividend raises, companies persuade investors to either buy or hold the scrip instead of selling them. Looking ahead, Whirlpool Clorox remains confident of its growth potential, suggesting enhanced value for shareholders via dividend payout.
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