Clorox (CLX) Diversity and Dividend Fuels Company's Future - Barron's

Clorox Corp. (NYSE: CLX) has long had a reputation for being America's de facto standard in making clothes whiter and brighter. However, according to Barron's, the company's diversification and steady dividend could help revive an ailing portfolio.

The company also claims rights to products such as Kingsford charcoal to Brita water filtration systems, and even ArmorAll, Fresh Step, Glad, Hidden Valley and Burt's Bees [this author's personal favorite lip balm].

Because of the recent recession over the past few years, consumers have wandered away from brand name products in favor of generics.

The company has been a solid performer, currently ahead of the market YTD, but lagging the Dow Jones Nondurable Household Products Index over the same period.

The stock appears cheap, trading at about 14.5x FY10 EPS estimated, compared to historical lows of 14.6x, 17.1x for competitor Colgate-Palmolive (NYSE: CL) and 15.3x for Proctor Gamble (NYSE: PG). Clorox's dividend of $0.50 also yields 3.3%, compared to PG's 2.8% and Cl's 2.12%. Clorox has the smallest market cap of the three as well, currently at $8.59 billion.

Jefferies & Co., who tracks private label branded products' market share gains-to-losses on a M/M basis saw Clorox with a slight decrease in January 2010 from December 2009, from 16.9% to $15.8%. Jefferies says this is good news, as Clorox is generally the lone brand name in many private label categories.

Innovations in many of its products, such as Sure Fire grooves in Kingsford charcoal, keep the products competitive, even in a downturn.

An analyst from RBC Capital Markets believes that the company should be able to "deliver 3 - 5% organic-sales growth on an ongoing basis and 10 - 11% EPS growth."

Clorox reported a Street-topping EPS of $0.77. Revenues are also up 5% Y/Y to $1.28 billion. RBC comments that the increase may be related to the H1N1 virus, but product innovation and introductions should fortify growth.

The company houses $154 million in cash, which is a 58% increase from FY08.

Risks include an initiative by bellwether Proctor & Gamble to reclaim market share that it may have lost, an economic double-dip, and a resurgence of private labels.

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