Clorox Stock: Still Great for Retirement (CLX)

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Clorox (CLX) stock rose sharply Monday after CLX said it’s pulling out of Venezuela because price freezes, triple-digit inflation and currency devaluation don’t make it worth doing business in the troubled South American nation.

The Clorox stock Company (NYSE:CLX)As painful as it is for CLX employees and consumers in the region, it’s a necessary move to keep Clorox stock chugging along as a superior dividend-paying retirement holding.

Clorox shut down operations and laid off all employees of Clorox Venezuela on Monday. Here’s what CLX said in a regulatory filing:

“This action is the result of pricing and other operating restrictions imposed by the Venezuelan government and related conditions that caused Clorox Venezuela to be insolvent and no longer financially viable.”

The subsidiary has been operating at a loss for three years as the government of Venezuela grapples with rocketing inflation and capital flight with devaluations of the bolivar.

Being forbidden to raise prices during a time of rampant inflation is a recipe for selling goods at a loss. After all, Clorox’s input costs are rising at a breakneck rate, and a weak Venezuelan currency converts into fewer dollars when traded in for greenbacks.

The price Clorox will pay for getting out of Venezuela isn’t even a dent in the income statement or balance sheet. Net of anticipated tax benefits, total exit costs and other termination-related expenses are expected to be approximately $70 million to $80 million, the company said.

Even better, CLX affirmed its fiscal 2015 outlook for earnings from continuing operations and sales — and that’s what really had CLX shooting higher, to the tune of 7% as of Monday afternoon.

Clorox Stock Is a Tank

Clorox stock is a relentless if boring dividend payer with long-term price appreciation to boot. No, CLX hasn’t been much of a help to retirement portfolios lately, but then, it’s supposed to lag a bit in rising markets.

After all, this thing is sleepy. Volatility isn’t anywhere in the CLX playbook. With a beta of about 0.5, Clorox stock can be thought of as half as volatile as the S&P 500. That means that although it underperforms in a rising market, it also holds up better when the market is selling off. Indeed, Clorox stock has underperformed the S&P 500 since the bull market began in 2009.

But of course, you hold CLX stock for a lot longer than five-and-a-half years. You hold it for decades. And over the past 20 years — which includes two massive market crashes –Clorox stock is up 600% on a price basis alone.

The S&P 500? Just 327%.

clorox stock
Click to Enlarge
Source: S&P Capital IQ

And for a retirement portfolio, it gets even better. Add in the dividend — currently yielding 3.1% — and the total return for Clorox stock over the past two decades is more than 1,000%! Just have a look at the embedded CLX chart, courtesy of Capital IQ:

Furthermore, CLX is a very high-quality stock, as defined by return on equity. Usually, an ROE or 15% to 20% is the lower threshold for a quality investment. Clorox has an ROE of more than 300%.

True, Clorox stock has been dead weight throughout this bull market — but bull markets don’t last forever. Most retirement portfolios will be well-served by CLX when stocks finally do top out.

As of this writing, Dan Burrows did not hold a position in any of the aforementioned securities.


Article printed from InvestorPlace Media, https://investorplace.com/2014/09/clorox-stock-clx/.

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