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The 5 Safest Dividend Stocks Part 2: Clorox
03/31/2020 5:00 am EST
In this 5-part series, we select the five safest dividend stocks around — each a Dividend Aristocrat with 25+ years of consecutive dividend increases, notes income expert Ben Reynolds, editor of Sure Dividend.
An attractive quality of our top five safest dividend stocks is that they managed to outperform the S&P 500 during both The Great Recession and the recent Coronavirus Crisis.
Our second pick in the series is consumer staples manufacturer Clorox (CLX). Fundamentally, we expect Clorox to hold up very well during this time of economic uncertainty, because it is a major manufacturer of cleaning and sanitation products.
Clorox stock has increased 12% year-to-date, while the S&P 500 Index has declined 21% so far in 2020. Clorox has delivered a huge level of outperformance versus the broader market this year, as the company is optimally positioned in terms of its product portfolio.
Just a few of Clorox’s core brands include Clorox bleach and cleaning products, Pine-Sol, Liquid-Plumr, Fresh Step, Glad, Kingsford, Hidden Valley, Brita, Burt’s Bees, RenewLife, and more. Its core cleaning product portfolio should hardly see sales decline at all—and perhaps sales will even increase—during the coronavirus crisis.
These are the products consumers will likely purchase more of during the lockdowns currently taking place across major U.S. cities, in an attempt to stem the outbreak of coronavirus. And, sales of these products will likely continue to hold up even in a prolonged recession, due to the simple fact that people will always need to clean their homes, regardless of the economic climate.
Clorox’s strong brands are a unique competitive advantage that should lead to continued growth for many years, even in a recession. According to the company, more than 80% of its revenue comes from products that are #1 or #2 in their respective categories.
These strong brands enjoy steady demand from year to year, even when the economy is in recession, and also provide Clorox with the ability to increase prices on a regular basis.
Clorox has a long history of dividend growth. It has increased its dividend for 42 years in a row, including an impressive 10% increase in 2019. The stock is also attractive for income investors as it provides a dividend yield above the broader market index. Clorox currently yields 2.5%, slightly above the 2.3% yield of the broader S&P 500 Index.
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