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Clorox Dividend Cut? Payout Ratio Spikes Amidst Falling Profits
28 Sep
Summary
- Clorox raised its annualized dividend to $5.00, but coverage is thin.
- Operating cash flow dropped 37.61% and net income fell 27.53%.
- CEO targets fiscal 2027 EPS of $5.70-$6.00 amid inflation headwinds.
Clorox recently increased its quarterly dividend from $1.24 to $1.25 per share, bringing the annualized forward rate to $5.00. This marks an ongoing annual increase, but the company's financial performance raises concerns about dividend sustainability. In fiscal year 2026, Clorox reported a 5.41% decrease in revenue, a 27.53% drop in net income, and a 37.61% decline in operating cash flow to $612 million. Gross margins also contracted significantly, impacted by acquisition costs and higher commodity prices.
Leverage has increased following the acquisition of GOJO Industries and a termination payment to Procter & Gamble, with total liabilities rising by 48.49%. The payout ratio has climbed to approximately 85% of net earnings, which is considered elevated compared to industry peers. Despite these pressures, CEO Linda Rendle has guided for fiscal year 2027 adjusted earnings per share between $5.70 and $6.00. However, the company anticipates inflation headwinds exceeding $200 million, roughly double the historical norm, with recovery anticipated in the latter half of the fiscal year.
