5 Dividend Growth Stocks to Buy

2. The Clorox Company (NYSE: CLX)

Number of Hedge Fund Holders: 37
Dividend Yield: 2.8%

The Clorox Company (NYSE: CLX) is a consumer staples corporation manufacturing and marketing a range of products across the globe. The company operates through its Health and Wellness, Household, Lifestyle, and International segments, and ranks 2nd on our list of dividend growth stocks to buy.

As of this August, analysts at DA Davidson hold a Neutral rating and a $145 price target on shares of The Clorox Company (NYSE: CLX).

In the fiscal fourth quarter of 2021, The Clorox Company (NYSE: CLX) had an EPS of $0.95, missing estimates by $0.36. The company’s revenue was $1.80 billion, beating the previous quarter’s revenue of $1.78 billion.

By the end of the second quarter of 2021, 37 hedge funds out of the 873 tracked by Insider Monkey held stakes in The Clorox Company (NYSE: CLX) worth roughly $980 million. This is compared to 38 hedge funds in the previous quarter with a total stake value of approximately $1.2 billion.

LRT Capital Management, an investment management firm, mentioned The Clorox Company (NYSE: CLX) in its first-quarter 2021 investor letter. Here’s what they said:

“For several months now, our largest position has been Clorox – the cleaning products company. Besides wipes, the company also manufactures bleach, charcoal, cat litter, plastic bags, and container products. Clorox benefited during the Covid-19 pandemic from an increased demand for cleaning products. Companies and consumers trust the Clorox brand – a source of the company’s huge competitive advantage.

United Airlines, for example, chose to partner with Clorox in its push to reassure consumers about the safety of air travel. The company is a typical “defensive” holding – subject to very small fluctuations in end market demand. Its branded consumer products remain in strong demand. Historically (pre-Covid), the company’s sales grew in line with GDP, while earnings-per-share grew slightly faster due to operational and financial leverage. We expect sales will decline slightly in the next few quarters as the Covid-19 pandemic comes to an end, but we believe this decline is more than accounted for by the company’s low valuation.

On February 4th, Clorox reported results for Q4 2020, with both earnings and sales beating estimates. Sales grew by +27% (vs. 20% estimate) from the prior year’s Q4, and EPS increased +39% ($2.03 vs. $1.75 expected). The company continues to see robust demand and raised its sales and EPS guidance for the rest of the year. Shares are down 4% year-to-date. We believe the shares are undervalued at 20x trailing and 24x forward earnings and currently represent an excellent opportunity.”