Will Clorox, the cleaning product producer, continue to pay dividends?

The Clorox Company (CLX), a cleaning and cleaning products company, has been paying dividends for almost fifty years. At the moment, the dividend yield is about 3%. However, the company’s free cash flow suffered a significant decline due to inflation. Clorox was one of the companies that did well because of the epidemic, which made people buy a lot more cleaning and disinfecting products.

Such demand could not be sustained for long, and thus a steady decline against the backdrop of economic recovery and the waning effect of the epidemic was inevitable. Clorox’s greater difficulty, though, was not the drop in sales but the effect of inflation and supply chain issues. As a consequence, Clorox’s profit margin is fast declining, jeopardizing dividend payments.

The corporation intends to offset the inflationary effects by boosting prices across the board. It’s impossible to predict how this may affect demand and the company’s overall cash flow. Dividends paid now total $566 million, while free cash flow has reached $563 million. That is, the corporation needs extra capital to sustain its current dividend volume. Dividends play a significant role in attracting shareholders, particularly substantial ones, for a conservative corporation like Clorox, with generally moderate growth (the pandemic time being an exception).

For the previous 53 years, the corporation has increased its rewards each year. The annual dividend has increased by 428 percent over the last two decades, with an effective return of 3% now. The corporation will have to address the issue of free cash flow in the near future.