Recent Buy

buyI won’t lie to you guys. It’s tough for me to find real strong values in the market right now, and I’m having to look far and wide for stocks that I feel are even fairly valued. The Shiller P/E ratio currently stands at 25.57, which isΒ significantlyΒ above the long-term median value of 15.91.Β After my recent sale of shares in Lorillard Inc. (LO), I knew that while I didn’t want to sit on a bunch of cash because it’s a horrible asset for the long haul, I also didn’t want to invest in anything that didn’t offer a compelling long-term case based on fundamentals and value. What’s a dividend growth investor to do?

Easy! Stick to the plan.

My most recent purchase is with a new company,Β and one that I feel has much less inherent risk than Lorillard. Though the valuation is similar and the yield is a bit less with this new investment, it’s simply about managing risk while also keeping an eye on the very long term. I think that while tobacco stocks will likely continue to do well over the next 5-10 years, at some point many will likely hit a will as the secular decline in smoking rates overcomes their ability to raise prices. I simplyΒ feelΒ this new investment has a better risk profile looking out over 30-40Β years, which is my time horizon for investments.

I purchased 35 shares of The Clorox Co. (CLX) on 5/8/14 for $87.70 per share.

The Clorox Co. is a manufacturer and marketer of consumer products, including cleaning, household care, and specialty food products. They market their products in more than 100 countries worldwide. They operate in four segments: Cleaning (32% of FY 2013 revenue), Household (30%), Lifestyle (16%), and International (22%).

Some of Clorox’s brands include: Clorox, Pine-Sol, Fresh Step, Kingsford, Hidden Valley, Burt’s Bees, Glad, Brita, KC Masterpiece, Scoop Away, Tilex, Green Works, and Liquid Plumr. Nearly 90% of their brand portfolio has a #1 or #2 market share in their respective category, which is impressive.

This is a totally new investment for me, and looking forward I definitely want to have more exposure to companies that produce and market products that consumers all around the world will continue to need no matter what happens to the general economy. Companies that produce consumer staples typically sport lengthy and reliable dividend growth records, and Clorox is no exception.

Surprisingly, Clorox doesn’t have the most spectacular record of growth in the financials over the last decade. Revenue has grown from $4.324 billion in 2004 to $5.623 billion in 2013. This is a compound annual growth rate of just 2.96%. However, the company sold off their auto care business, which held brands STP and Armor All, to a private-equity firm back in 2010, which impacted revenue starting in 2011. Earnings per share have grown from $2.55 to $4.31 during this same time period, which is a CAGR of 6%. S&P Capital IQ predicts compound annual growth in EPS of 7% over the next three years.

Lately, Clorox has had trouble with growth, and most recently reported results (3Q FY 2014) shows that currency devaluation in Venezuela negatively affected EPS significantly, as EPS would have been $1.18 instead of $1.05 as reported. Volumes were also down 0.5% after currency adjustment, but up more than 1% currency-neutral. Clorox expects to increase EPS even with ongoing currency headwinds and continued product investment to drive innovation and growth.

As a dividend growth investor, however, I’m not just concerned with how well a business can grow, but also how much a company is committed to sharing that growth with shareholders via dividends and growth of those dividend payments. And on this front Clorox has been pretty strong. The company has a 37-year streak of dividend raises,Β and sports a 10-year dividend growth rate of 10.7%. However, the most recent raise, at 4.2% and announcedΒ just yesterday, was disappointing. I purposely bought in before the raise, anticipating a raise closer to 6% or so, but more incomeΒ is never something I complain about. And with a payout ratio that currently stands at 68.2% after the new dividend is factored, a rather small raise isn’t totally surprising. And share buybacks continue to remain strong – Clorox has repurchased 40% of their outstanding shares over the last 10 years.

Clorox plans on driving growth through innovation and continued marketing of their brand name products, as well as targeted M&A. Some of their newest innovation includes products like Clorox cleaning utensils in the international market, and Burt’s Bees Brightening face care line. Overall, the international exposure is still relatively light for them, and is a huge area for growth, notwithstanding currency issues. And one has to remember that this company only has a market capitalization of $11.5 billion, which is quite small compared to some major competitors like The Procter & Gamble Company (PG) with its nearly $220 billion market cap.

Furthermore, they have what they call their “2020 Strategy” which drives the company right now. They aim to make life better everyday. And their objectives are to maximize economic profit across all categories, channels, and countries. To do so, they want to be the best at building big-share brands in economically-attractive mid-sized categories and countries. One of their methods is what they call the “3D Brand Building Model” which focuses on Desire,Β Decide, and Delight. Basically, the company wants to market their products effectively to create consumer desire their products and decide to purchase them at the point of purchase, and then also delight consumers through higher quality.

One concern for this company, from my perspective, is the balance sheet. They have a massive debt/equity ratio ofΒ 14.9, but that’s becauseΒ the company has very little equity to speak of. They have about $1.1 billion in goodwill, which means their book value is very low. However, they have an interest coverage ratio of 9.5, which is fine. Overall, the balance sheet remains leveraged, but is not catastrophically so. Furthermore, it’s stable. Long-term debt has remained relatively unchanged over the last decade, and the company has been open about its desire to remain at this leverage level.

And there are other concerns with the company. One primary risk, in my opinion, is the fact that many of their products face heavy competition from private label products due to the fact that products like bleach and other household cleaners areΒ basically commodities. However, their pricing power remains intact, and Clorox bleach retains a 60% market share vs. private labels at just 38%. And their Kingsford charcoal is equally impressive with a 74% market share. So while one would think consumers might choose private label products due to pricing, Clorox continues to market their value and quality proposition well, and further innovation should help. One additional risk is the fact that Wal-Mart Stores, Inc. (WMT) and its affiliates accounted for 26% of FY 2013 sales. But this is common for many companies because Wal-Mart is such a global retail juggernaut, so I’m not concerned here.

So what about the valuation? Shares are trading hands at a P/E ratio of 20.2, which is slightly higher than their five-year average of 19.1. I don’t think that premium is all that worrisome considering where the broader market is at. I valued shares using a Dividend Discount Model with a 10% discount (my anticipated return) and a 6.5% growth rate. This growth rate is between Clorox’s own 10-year EPS CAGR growth average and the projected growth rate in EPS over the next few years, but also well below Clorox’s own 10-year growth rate in dividends. Overall, considering the recent performance I think this is accurate, but Clorox could surprise in the future as currency headwinds subside. This gives me a fair value on shares of $90.07. Lowering the growth rate down to 6% gives you fair value near $80. I’d say shares are probably pretty close to fairly valued here. However, with a yield of 3.38% after the raise, I feel comfortable investing here.

This purchase adds $103.60 to my annual dividend income, based on the quarterly dividend of $0.74 per share. Factoring in the Lorillard sale and subsequent loss of dividend income from those shares, I netted a lossΒ of $19.40 in annual dividend income from these two transactions. Not the way I’m looking to go, but I feel just a tad betterΒ about the overall long-term quality and safety of my portfolio here.

My portfolio now holds 47 positions, as this was a new investment.

I’m going to include current analyst valuation opinions below, as I use these to concentrate my reasonable valuation estimate.

*Morningstar rates CLX as a 4/5 star value, with a fair value estimate of $96.00.
*S&P Capital IQ rates CLX as a 2/5 star sell, with a fair value estimate of $57.50.

I’ll update my Freedom Fund in early June to reflect my recent addition.

Full Disclosure: Long LO, CLX, PG, WMT.

What do you think of CLX here? A fan of their brands? Think it’s fairly valued?Β 

Thanks for reading.

Photo Credit: Stuart Miles/FreeDigitalPhotos.net

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65 Comments

  1. Great co. a little rich valuation would definitley wait for a pull back. But, values are steep in this market. Building a cash position for future pull backs!!!!!

  2. Pole position (i hope).

    CLX is also in my radar list, and i think is also fairly valued (p/e for 10 years is around 19,40) so i’m not very compelled to pull the trigger.

    But due the market highs it could be a great move.

    Best regards,
    Manefla

  3. Thanks for sharing your purchases. Personally I think CLX is a bit too highly valued for my taste with a PEG of 3.19. Might I recommend a non-WMT/TGT retailer. I recently picked up ROST, but in my evaluation, GPS looked pretty good too. GPS has a lower P/E than ROST, but a lot of people I know see clothes at the Gap as overpriced for the quality and Ross as affordable, so I went with ROST hoping for more growth to justify the higher P/E.

  4. jharr,

    Thanks for stopping by!

    I think shares are fully valued here. I don’t believe there’s much of a margin of safety, which is disappointing. However, I don’t see many stocks in the market that I don’t already own a large chunk of that have a margin of safety. And I’m interested in increasing my exposure to companies like CLX, with other eventual candidates being GIS and CL, among others.

    But I can’t blame you for building a cash position. I hope we get some cheaper stocks here at some point, for both our sakes. πŸ™‚

    Cheers.

  5. Manefla,

    Sorry about the pole position. πŸ™‚

    Yeah, I agree. I think CLX is fairly valued as well. However, I think one could do worse than buying a company like CLX at fair value. With that being said, I would have loved to get in even cheaper. I can’t imagine how the broader stock market continues to run up from here, so I think we’ll get some cheaper stocks sooner rather than later.

    Best wishes!

  6. Energy stocks look compeling here, cvx,bp, as well as ge. Looking for real bargains to deploy some cash. I don’t mind holding some ca$h @ these levels?

    hope we both see values in the near future!

    Thanks,

  7. Adam,

    Thanks for sharing your thoughts!

    I remember looking at ROST a while ago. The problem for me was the very low yield, however. But I wish I would have bought because it went on an absolute tear after that point, and has been very aggressive in raising the dividend. But I don’t know if I’ve learned my lesson, because I’m still fixated on that low yield. πŸ™‚

    I continue to look at some lower-yielding stocks with more growth potential, though. I recognize that my portfolio needs some exposure there. Currently, I’m looking at DIS, NKE, SBUX, and COST as some potential names here.

    Appreciate you stopping by.

    Best wishes.

  8. Low earnings and a low valuation right now on clx but if you are in it for the long haul just sit back and collect the dividend. The company is very stable and their line of products are staples. Not a very exciting company but a soild dividend pick

  9. Clorox seems like a decent company. My only issue is that it seems at the top of the valuation range for me right now ( like most anything else), and the most recent dividend increase was really pathetic. I am not sure about adding to the stock at current levels for my portfolio, although I will keep holding onto my existing holdings.

  10. Why worry about high valuations, when we can BUY kmi,bp,ge,afl, even if were adding too existing positions. I understand the diversify reason but, don’t you buy when the valuation is compelling?????

    Thanks, good luck.

  11. First, I own DIS, NKE, SBUX, and COST. You probably can’t go wrong with any of them. Yes, the yield is low, but the growth prospects (earnings and dividends) make these attractive. 20 years from now the dividend growth blogs will be discussing what great companies they are and how much investors could have made if they had bought in 2014. πŸ™‚

    I have been hesitant to add CLX to my portfolio due to the slow growth and a P/E close to 20, but it’s a great company. I added UL a while back to compliment shares of PG and get more non-domestic exposure, and that was a lucky move with the price up 11% since then. But I agree with you that CLX and CL are great companies for the long run.

    I saw an article touting ROST, CHD, and TSCO a few days ago. CHD (Church & Dwight) is much smaller than CLX, increased revenues 9% and earnings almost 14% in 2013, and includes Arm & Hammer, Nair, Orajel, Oxiclean, and Trojan amongst it’s 80 some brands. The yield is only 1.8% and the P/E is 25, so it isn’t cheap either. CLX is a much safer pick, but CHD could be a great buy if we see a pull back in the market. ROST and TSCO also looked like potential home runs in the small cap arena.

  12. MDP,

    Ahh, I see that! Nice going.

    I don’t think CLX is going to knock it out of the park for us, but seeing 8-10% returns from a stable, boring stock is just fine for me, especially in this market.

    Glad to be a fellow shareholder now with you!

    Take care.

  13. Asset-Grinder,

    You’ve got it. I’m going to just enjoy the rising income and smile. πŸ™‚

    And the more boring the better, in my opinion. When I’m reading an annual report and yawning, that’s the best. It’s when I have to carry around a dictionary and look terms up that I get worried.

    Cheers.

  14. DGI,

    Thanks for stopping by!

    Yeah, I was a little disappointed with the dividend raise. I tempered my expectations after the currency headwinds, but I expected another penny. That would have put it near 6%. But currency issues have a way of reverting to the mean over the long haul, and I think they’ll be fine. They would have actually had a great 3Q without the Venezuelan currency devaluation, but such is life. Another penny and they would have been right there with raises by companies like JNJ and PG. At least it was better than WMT. πŸ™‚

    We’ll see what happens with the new products coming down the pipeline. I think the valuation looks a bit high due to some international market issues, but if they can overcome that they might surprise. In the meanwhile, we get to collect our dividend.

    Best wishes!

  15. jharr,

    I agree some of the energy stocks look compelling, although much of the value that was there just recently is now gone. CVX and BP have both moved up a bit here over the last month or so, although I still think BP in particular makes sense here. Unfortunately, I already have major positions with both of them.

    And I think GE is another decent pick, and it’s up some from where I bought it. I already have a position with that company as well, but I’m excited about its prospects. I picked up some more GE not long ago.

    And I do hope we get some better values in the future. I don’t really see anything that’s all that exciting right now. But I continue to allocate capital as necessary into selective opportunities because I want to continue growing that snowball! πŸ™‚

    Cheers.

  16. jharr,

    It all depends on your comfort level and what kind of portfolio you’re building. If you were building a more concentrated portfolio then it might make sense to keep adding to a few names. However, I plan on having 50 or so stocks in my portfolio, and I’ve already got large positions with KMI, BP, GE, and AFL. If I continue to add, add, add to these names every time I get new capital I’ll have no capital left for other companies like CLX (and others I have my eye on). I diversify to mitigate loss of capital and/or dividend income. Now, if I had an endless stream of capital it would be different. However, I’m limited to a couple thousand dollars or less per month, so every purchase depletes my resources for another month. And every potential investment competes with every other available investment that’s available.

    Hope that explains my reasoning a bit.

    Best regards.

  17. IP,

    I agree. They’ve got some great products with excellent brand name recognition. I hope to round out my portfolio with names like GIS, CL, UL and the like in the future. Recession-proof products are where it’s at. πŸ™‚

    Thanks for stopping by.

    Cheers!

  18. KeithX,

    Thanks for adding that.

    Yeah, I missed out on UL. I was writing about them seemingly every other week, and for whatever reason never actually bought shares. I was going back and forth between them and Target and picked Target. Then Target dropped and I bought more. Before I knew it UL popped on me. Oh, well. I’ll eventually own a chunk of that company! πŸ™‚

    And I agree with some of those names. And those all seem like compelling investments. I think I’m most interested in SBUX right now, but I’d look at DIS at the right price/yield.

    I’ve looked at CHD before. The price was always too high for me, and still is. However, they’ve got some great brand names and I’m very excited about their potential. I agree that in a pullback that would be one to snatch. I’ve never actually looked at TSCO before. I’ll have to take a peek!

    Appreciate your perspective.

    Best wishes.

  19. DM,

    Glad you are staying on target despite the huge changes in your life! Keep up the great work and thank you for sharing your journey with us.

  20. Thanks for all your posts and transparency. I’m rooting for you as you are in the midst of your life changes.

    I seriously considered adding clx, but can’t get over the debt level. Their interest coverage made me feel a little better, but I don’t see a pretty picture for them when interest rates start climbing. If you remove borrowing as an option, the only other options are to use cash from operations (which means less for dividend growth) or selling equity (which shrinks the size of my ownership of the company). If they had a low pay out ratio, I might reconsider…but I don’t see a lot of potential here fit dividend growth investors.

    I decided to add to my oxy position instead of initiating a position with clx.

  21. DivStrong,

    Thanks for the support. Really appreciated!

    I don’t know if I’m going to get in a stock buy this month with fresh, new capital. And that would be only the second time in four years that happened. However, if there were ever a time I was okay with not having a lot of capital for stock purchases it would be now. We’ll see. I’d hate to go a month without buying, but at the same time I have to be careful with capital conservation in light of no longer working a traditional job.

    Appreciate the kind words! πŸ™‚

    Best regards.

  22. James,

    I hear you. We’ll see what happens with interest rates. I don’t know when it’s going to happen, but at some point they’re going to start to rise from here. However, their interest coverage ratio could be cut in half and they’d still be okay. And that’s not factoring in rising income, which I anticipate or I wouldn’t be investing in the company.

    Of course, it could go the other way with greater currency problems right at the same time as rising interest expenses.

    Overall, I think the risk/reward relationship here makes sense due to the constant demand for their products. However. I wish there was a margin of safety here.

    And nice move there on OXY. I looked at it at $77 or so but was concerned about executive compensation. It’s done well since then.

    Cheers!

  23. I see you’ve been busy with some spring cleaning. It goes to show that just because your accumulation stage is on hold it doesn’t mean there isn’t portfolio action. I guess I’m in a similar spot right now, as a matter of fact. I still have fun just doing a little monitoring of my own, namely dividend increases. CLX is one of my favorite companies, it’s just one of those old faithfuls that you can trust. I have to admit that I am bit disappointed with the low dividend increase, but hey last year it was 10%, so I’m sure it’ll reward me better in the future.

    I believe Medtronic is set to increase their income in June, so that’s something to look forward to.

  24. Sometimes you need to make tough choices. Don’t know about clorox, but they are not going away. Their brands are strong and hard to replace. Much luck with them. Also think about something like TUP, good p/e … or energy stocks right now.

    Regardless, you can never go wrong with basic or consumer goods.

    -best
    -grem

  25. DM,
    I’m in the drip for CLX, slowly building a position. The dividend increase was a disappointment, but they are committed to a continuing annual increase. Strong brands. $87.70 was a good short-term dip, and down from $96.76 52-wk high. Good buy here. Can always pick up more if it goes lower.
    -RBD

  26. I’m surprised to hear you discussing shiller p/e. It’s been reporting stocks as “overvalued” ever since the GAAP rules changed in the early 90’s. The only time it dipped into undervalued territory was in early 2009, when everything was dirt cheap and people thought the world was ending, and even then it only dropped to 14.85. I could go on, but I’d just be quoting Jeremy Siegel for most of it. I lump shiller p/e in with the efficient market theory as things that sound good on paper but don’t work in practice.

    Luckily for me, I had only a small position in KMI and no stake in AFL, so I was able to pick those up at reasonable prices, but am now at a loss on what to buy next.

  27. Spoonman,

    I’m with you. I was a little disappointed with the raise too. I tried to jump in before the raise came, and was expecting another penny or so. However, I still think this is a nice long-term play here. These are great recession-proof products, and the market share is impressive. Plus it’s a pretty small company, so there should be lots of growth ahead. We’ll see. πŸ™‚

    And I also quite enjoy watching the dividend raises come in. Who doesn’t love more money??

    Thanks for stopping by!

    Best wishes.

  28. Dividend Gremlin,

    Absolutely. Tough to go wrong on bleach and charcoal, right? At least, I would think so. CLX has had a tough go of it for the last couple years or so, but factoring out currency headwinds they have actually done much better. I think those issues will smooth out over time and revert to a mean, and you also have growth from core operations as well. Overall, CLX should provide 8-10% annualized returns over the next decade, assuming they perform to plan.

    And there are quite a few plays in the energy sector that look good to me: KMI and BP come to mind right away. And CVX isn’t bad either.

    Take care!

  29. RBD,

    Thanks for stopping by!

    Yeah, strong brands, surprisingly strong market share, and recession-proof products. The valuation isn’t quite compelling, but I think it’s a fair price for the business. And it’s a fairly low-risk play for me. The yield is healthy, and they’re committed to growing the dividend even during tough times. Not much to dislike, although I hope we get a bigger raise next year! πŸ™‚

    Cheers.

  30. Justin,

    The Shiller P/E ratio isn’t perfect (nothing is) but it’s one of the best indicators out there of forward returns. And Shiller would be loathe to be included in a discussion about MPT, as he’s one of the biggest detractors out there. And I like some of Siegel’s stuff too, although he can be a bit overly euphoric at times. I really like Shiller because he often comes across a voice of reason when everyone else wants to buy stocks hand over fist.

    If you don’t like the Shiller P/E ratio, another broader valuation metric is total stock market cap to GDP. A close cousin to Buffett’s favorite metric (cap/GNP), you can see the current ratio here:

    http://www.gurufocus.com/stock-market-valuations.php

    I don’t buy the stock market, so I don’t get overly wrapped up about these numbers. However, I think no matter how you decipher the data, it’s apparent that the overall stock market, and most of the stocks for sale within the market, are expensive on a historical basis. That’s not to say certain stocks aren’t still attractively valued, but rather that these bargains are hard to come by and not quite the bargains they were just a few months ago. I think the short term may not be kind to equities, but I’m not all that concerned because I’m investing for the next few decades. As such, I continue to find the best stocks I can with what capital I have available and invest where it makes sense for me, considering my portfolio as a whole.

    And nice job there with KMI and AFL. I think those two represent some of the better values in the market right now. If my portfolio gets much bigger I might add a little more to KMI. However, that’s a bit risky with the debt level and the business structure.

    Cheers!

  31. I can hear you about not finding values at the moment. I have been looking at biotechs recently and established a position in Gilead a month ago. After the industry-wide sell-off I think there is value to be found. However most biotechs are not paying a dividend.

  32. DM,

    I was hoping you could help me. Have ever seen a study on waiting on a good value versus getting your money working for you?

    For example using the S&P PE as a surrogate for JNJ’s PE ratio and assuming constant earnings:
    -On 1/1/1992 the S&P PE was 25.92. If you bought 100 shares of JNJ on that day it would be worth $118,625.31

    -If you waited until 1/1/1995 when the S&P PE was 14.89 for a reduction of 42% and bought 142 shares of JNJ on that day then it would be worth $82,916.92 today.

    I know, JNJ again; however, there is a wonderful calculator on their website that lets me gather data quickly. In other words, I’m lazy! πŸ™‚

    Before everyone gets worked up about the earnings weren’t the same or other items, I was just using this to illustrate something I have always wondered about. Is it better to wait for a good deal or is it better to get your money working? Or another way to look at it: is the power of time and compounding more important than getting a good deal on the initial purchase?

    I have heard of studies (but have not read them) that say the determining factor for wealth is to invest early and invest often. These studies seem to say that getting a good deal doesn’t have as strong of an influence as time and compounding.

    My wife and I typically don’t worry too much about valuations when we purchase shares. The more important factor for us is the company has been and can continue to grow their dividend. During that time, the dividends would have been buying many more shares for me as it slaved away making money for me. No we won’t win any investing contests; however in the end, we will be very comfortable and will have little to worry about as our money works for us.

  33. I know that cash is a terrible asset in longterm. However, why not save some money (5-10%) and load your elephant gun as Buffet would have said. It would reduce your risk and and eventually enhance your income. Why so anxious? Why no patience?

  34. I also like CLX as they have great brands that people are going to continue to buy in both good times and bad. CLX also has a very good track record of rewarding their investors through dividend increases. Although their recent increase wasn’t what many expected, it was still an increase nevertheless.

    Wishing you continued success on your journey!

  35. Good buy here, I was looking at CLX myself for a while now, never seems to get my full attention. Great company with recession proof products. It is also very nicely diversified with fantastic brands.

    Takes a lot of guts to buy in a peak of the market, I applaud you.

    Until next time, take care.

  36. Forgot to say that we bought CLX a couple of weeks back. When I researching, I didn’t realize all of the brands that CLX makes. I was just thinking bleach.

  37. Christoph,

    Interesting. I’ll have to take a look at some biotechs. However, I’d be limited to those paying and growing dividends. Amgen might fit the bill here.

    Thanks for sharing. I hope Gilead turns out to be a fantastic investment for you! πŸ™‚

    Take care.

  38. itsme,

    I think one could pick out certain investments and time frames to make their point either way. Back testing, in my opinion, is limited in this fashion, and, of course, there is bias there as well.

    I view the power of compounding as incredibly important. I would never want my ego to get in the way of investing. To believe that I’m somehow more intelligent than almost everyone else out there and I can pick the times to dance in and out of investments, to me, is just naive. Furthermore, the great thing about dividend growth investing is that you’re not limited to one investment (the entire market). And since that is the case, I believe there are always better investments than others available at any given time. We’re looking at many different companies with different products, markets, end users, revenue and profit growth rates, debt levels, managements, etc.

    However, I still view valuation as paramount to long-term returns. The more you pay today, the less dividend income you receive in the future and therefore the less compounding firepower you have at your disposal. You can overcome paying slightly too much through the power of time, so this depends on your investment time horizon. I’m quite young still, so trying to worry about where stocks are going to be a year from now ignores the thought of where stocks might be 20 years from now. In addition, I think it’s more important to get the business right than it is to get the valuation right. Investing in a horrible company at a great price is way worse than investing in a great company at a horrible price.

    Just my thoughts on it.

    Cheers!

  39. Nils,

    Well, if I refrained from investing when stocks were historically expensive, I wouldn’t have been investing over the last 18 months or so. And I wouldn’t be generating the almost $6,000 in annual dividend income I am right now which I get to reinvest on a regular basis, compounding my future income even more. I would have been sitting on cash, and I’d still be sitting on cash. When’s the right time? When it drops 5% from here? 10%? Or maybe 20%, which gets me back to where it was 18 months or so ago? Staying consistent, in my view, is far more important than trying to time the market for the exact right time to invest money. Speaking plainly, there is no exact right time. I believe it’s more important to focus on high-quality businesses than it is to try and time the most attractive prices.

    With that being said, I have a rather unique time frame. I’m quite young, so I’m not worried about where CLX is going to be a year or two from now. I’m rather concerned with where CLX is going to be 20-30 years from now. When it’s trading for $300/share, it won’t really matter if I paid $87 or $83. However, I also have only eight more years (I’ll be 40 in eight years) before I want to be in the position where I’m generating enough passive dividend income to live off of and become completely financially independent.

    And while there is no exact right time to invest, I also view anytime you have available capital and you see a reasonably priced, successful business in front of you as a smart time to put cash to work. That’s just my view, and this blog is a reflection of that belief. And the results of that strategy are published regularly.

    Best regards.

  40. AFFJ,

    Thanks so much! I appreciate the support.

    CLX sells products that are pretty much recession-proof, which is wonderful. And while the recent raise wasn’t anything to get too excited over, it was higher than inflation and also shows how much management prioritizes the dividend growth. For me, that’s a great sign for the future.

    Thanks for stopping by.

    Best wishes.

  41. Dividend Vet,

    Thanks! I hope you get a chance to take a good look at CLX and see what you think. It’s not overly cheap here, but considering where rivals like CHD, CL, and PG are priced, I think it’s reasonable. The yield is attractive and the products are great. Furthermore, this is still a relatively small company. That means they’re a bit more volatile, but there’s also more room for growth. We’ll see how it goes!

    Cheers.

  42. itsme,

    Glad to have you on board as a fellow shareholder. πŸ™‚

    And they’re definitely more than bleach. I actually find it weird, however, that they have such exposure to food. I could imagine at some point they’ll focus more on household products and less on food, and possibly sell/spin off some of their lifestyle products, but that would only be helpful if they’re able to generate more growth in the core products.

    Take care!

  43. I own CLX, WMT and PG in my DRIP portfolio along with other blue chips companies, as elaborated on my blog. You made good choices here! Thinking to own LO but it shot up quite a bit, and had to abandon plans to hook with it.

    Take care.

  44. Hi Jason, I like Clorox too but still waiting if one day price will drop a little more. But it’s just me because I like sales… πŸ™‚ but Clorox is half way in between their 52 weeks low and high, so almost sale… πŸ™‚ plus dividends always helps.

  45. Hi Jason,
    I find usefull information and comments on your blog. I just recent discovered it and now I visit regular.
    Many thanks and please try to keep it up.

  46. DM,

    Congrats with yet another purchase. Looking at your portfolio I can understand that it is getting harder and harder to find companies that fit the strategie AND are fairly priced AND you don’t have a considerable investment in just yet. CLX seems to tick all of those three boxes and as a result is a great purchase for you! I just started a position in Aflac and BP, which to me felt a bit more attractive at the moment, but I can imagine it is different for you as you already are heavily invested in especially Aflac. Keep up the good work!

    Best.

    DW

  47. Hi Dividend Mantra,

    I have to say that I absolutely love the way you go about your investment decisions. The way you articulate you rationale from a valuation perspective and a qualitative perspective is just fantastic. You’ve clearly got a rock-solid, consistent plan and process, which is pretty obvious from all your past posts. It sets a fantastic example for others out there on how to go about it.

    I particularly like that you openly talk about the risks and what could go wrong (e.g. competition from private label company, balance sheet risk) and clearly make these decisions with your β€˜eyes wide open’.

    I haven’t looked at this stock closely, but from what you say it does sound fairly valued (particularly from a P/E perspective). Perhaps the cost of equity might be a little lower than the 10% used in your Dividend Discount Model, given how stable the business is, but this is probably offset by some of the risks you’ve highlighted.

    Despite seeming fairly valued, I think your comments above about your 20-30 year timeframe, and putting your capital to work when you have the opportunity makes it sound like a good decision. No one knows where valuations will go in the short-term anyway, even if it does seem like it’s approaching a peak.

    Best of luck with this investment, hope it becomes a solid contributor to the rest of your portfolio!

    Cheers,

    Jason

  48. I picked up my initial position in CLX almost exactly 2 years ago and right now I wouldn’t mind adding to it. It is a little on the high side but so is the entire market.

  49. Can you time the market? Please open an investment fund and I will give you all my money. Then, I’ll borrow some money, and invest that with you as well.

    Market timing is a fool’s errand. The best policy is to consistently invest (more or less). This takes a little of the emotion out of it.

  50. PIM,

    Those are some very solid companies you list there, and I’m a happy shareholder in them as well. Ups and downs are bound to occur, but I don’t see any of them going out of business anytime soon. WMT had a rough day today, but e-commerce was way up, so that’s encouraging.

    Cheers!

  51. Happy,

    I’m with you! I like sales too. πŸ™‚

    We’ll see what happens with CLX and the broader market here. I imagine we’re going to see a big pullback at some point here, but it’s anyone’s guess as to when. In the meanwhile I’ll continue to rack up the dividend income.

    Cheers!

  52. Jos,

    So glad you found the blog! I hope you continue to stop by and find some useful information. I’m so grateful to be part of this community. It’s a wonderfully supportive group. πŸ™‚

    Best wishes!

  53. DW,

    Exactly. You nailed it there. It’s not just deals I’m on the lookout for, but also deals that I’m not already heavily allocated to. I could just keep buying AFL month after month after month, but then when I’m sitting at a 50% or more weighting to AFL what do I do then? And what if I’m wrong on AFL? What if they don’t perform as I anticipate? Now I have a large allocation to a bad investment. That’s the thing – diversification mitigates these risks.

    However, I believe you made a great choice there with AFL and BP. I think those are two of the more attractive opportunities available right now. Like you mention, I already have a large position with both, but if I didn’t I would be all over them. πŸ™‚

    Thanks for stopping by! And keep up the great work on your end too.

    Best regards.

  54. Jason,

    Thanks for stopping by! I appreciate the thoughtful comment there.

    And I always try to put forth a balanced case with any investment. Every investment is a bet, so one has to carefully weigh the benefits against the drawbacks. Most times if you’re investing intelligently those bets are going to work out in your favor, especially if you’re investing in high-quality companies. However, duds will eventually come around, and it’s important to invest with “eyes wide open” as you put it so that you’re not totally shocked when an investment blows up in front of you. If CLX can’t raise the dividend anymore in 3-5 years because the payout ratio became too high and interest expenses rose more than expected, then I’ll know that I walked into that situation knowing that was a possible end result. I think it’s more likely that they’ll do very well over the next couple decades, but it’s all just a bet.

    Thanks again for the comment. Your thoughts echo my own, and I really appreciate your thoughts!

    Best wishes.

  55. Eddie,

    Nice job there on the initiation a while ago. I’m finding most of my investments from two years ago up quite a bit. I’d love to have those prices again! πŸ™‚

    And I agree that CLX is a bit on the high side. I think one could make a case that fair value on this company is anywhere from $80 to $90 per share. So I don’t think it’s outrageously priced, but it’s not cheap either.

    Stay in touch!

    Take care.

  56. DM,

    Awesome post and excellent purchase. Great work catching the new dividend increase as well, as the ex-date isn’t for quite some time. Loving the purchase. I’ve followed CLX for quite some time and haven’t pulled the trigger yet – I believe more than likely it is due to the above average P/E. Valuation is hard right now, finding the right buys has been difficult. I work in the FI industry, and lately the bank stocks have been taking a large “smack” for lack of better words. Off topic, but great job and also – congrats on breaking the mold from the sales position in Florida and heading back to where your heart and larger happiness is back in Michigan. Excited for what’s to come for you!

    -Lanny B, one of the Dividend Diplomats

  57. Lanny,

    Thanks for stopping by! I wish you guys the best of luck with your journey. πŸ™‚

    And I appreciate the kind words and support. I’m looking forward to seeing family more, especially now that I have more time than ever. For the first time in years I’m not sure what tomorrow brings, but maybe that’s what’s so exciting about it.

    Best wishes!

  58. Hi Jason,

    CLX is definitely a nice pick. I’m planning on buying some shares pretty soon. Strong company, great brands, it’s also a dividend Aristocrat.

    Thanks

  59. Allan,

    Thanks! Yeah, I think CLX is a pretty solid business. The last few years haven’t been super impressive, but I’m confident they’ll be fine for the long haul. Currency devaluation had a pretty large effect on their last quarter, but cleaning supplies aren’t going anywhere.

    Best regards.

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