Clorox (CLX) presents a compelling opportunity for dividend investors, currently offering a yield of 4%. Analysts believe this dividend is not only secure but also has the potential to grow at a mid-single-digit annual rate over the next decade. As the company navigates a challenging economic landscape, its commitment to enhancing brand capabilities stands out as a key factor for improved sales growth.
In recent discussions, Dave Sekera, Chief US Market Strategist at Morningstar, highlighted Clorox as a recommended stock during the “4 Stocks to Buy Before Their Big Discounts Disappear” episode of The Morning Filter podcast. Despite a 20% increase in stock value in 2026 thus far, analysts suggest it remains approximately 25% undervalued compared to a fair value estimate of $163.
Resilience Through Challenges
Clorox has demonstrated resilience amidst various pressures, including the COVID-19 pandemic, supply chain disruptions, rampant inflation, and a cybersecurity attack in 2023. The company’s strategy focuses on innovation and strong marketing efforts, which are essential in an environment characterized by sluggish consumer spending and heightened competition.
Morningstar’s metrics indicate a robust economic moat for Clorox, attributed to its diverse brand portfolio and strong retailer relationships. The company has maintained an impressive return on invested capital (ROIC), averaging 42% over the past decade. Analysts project that ROIC will average around 35% annually for the next ten years, significantly outpacing their estimated cost of capital of 7%.
Financial Outlook and Investment Risks
The fair value estimate of $163 is based on a 16 times enterprise value/adjusted EBITDA multiple projected for fiscal 2026. Analysts expect a 6% decline in organic sales for that year, with adjusted earnings per share estimated at $6.30. Long-term projections include nearly 4% annual sales growth and high-teens operating margins, with expectations of gross margins in the mid-40s.
However, the consumer packaged goods sector remains highly competitive, presenting several risks. Increased consumer preference for private-label products could negatively impact Clorox’s margins and sales growth. The company’s ability to manage volatile input costs will also be crucial. Clorox faces the challenge of balancing price increases without sacrificing volume, especially during periods of economic uncertainty.
Despite these challenges, proponents argue that the pandemic underscored the need for Clorox’s disinfecting products, which account for about one-third of its revenue base. Additionally, the company’s ongoing system upgrades are designed to enhance decision-making and demand planning.
On the other hand, critics point to the promotional spending pressures in categories such as litter, bags, and wraps, which could re-emerge in a sluggish economic climate. The potential impact of inflation and tariffs, estimated to add $40 million in costs annually, also poses a significant risk to profit margins.
While Clorox continues to strengthen its core brand focus, the company must remain vigilant against market fluctuations. As of February 10, 2026, Clorox is positioned as an attractive investment, backed by a solid dividend yield and a commitment to long-term growth.
