Meet the 5.1%-Yielding Stock That Just Increased Its Dividend for the 49th Consecutive Year. Here's Why It's a Buy in August.

Clorox (NYSE: CLX) investors have had little to smile about lately. If you'd invested $1,000 in Clorox five years ago, you'd have just $621 today. And that's even when factoring in dividends.

But long-term investors care more about where a stock is going than where it has been. Here's why the worst of Clorox's struggles could be in the rearview mirror and why it stands out as a top high-yield dividend stock to buy in August.

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Clorox adds a powerhouse brand

On April 1, Clorox completed its acquisition of Gojo Industries, adding the Purell brand to its health and hygiene portfolio. The segment now accounts for more than half of Clorox's total net sales and remains the key driver of its overall sales growth.

Clorox expects the Purell acquisition to make a big impact on its fiscal 2027 results. Clorox is guiding for a 13% to 14% increase in net sales for the upcoming fiscal year. But only 3.5% to 4.5% of that increase is expected to come from organic sales growth (the GOJO acquisition accounts for 9.5% of the forecast).

All told, adjusted earnings per share are expected to be $5.70 to $6.00 -- a 3% to 8% increase from fiscal 2026.

Challenges remain for Clorox

Fiscal 2027 will mark the first full year in which Clorox will report after its enterprise resource planning (ERP) overhaul (completed in February). The $580 million ERP implementation took longer than expected and cost more than anticipated. But it should make the overall business more efficient as Clorox integrated its financial, supply chain, and sales functions under a new cloud-based system.

For years, Clorox has been struggling to gain its footing as it has implemented its ERP transition amid post-pandemic supply chain issues, inflationary pressures, and a costly cyberattack in August 2023. In its fiscal 2026 fourth-quarter prepared remarks, Clorox said it is now shifting from stabilization to optimization to realize the full benefits of its ERP implementation. However, management commentary included a bleak outlook on the state of consumer spending:

We expect our overall operating environment to remain challenging and uncertain, reducing planning visibility and widening the range of potential outcomes. We expect consumers to remain highly value-conscious in their purchasing decisions, putting pressure on overall category growth. We expect our category growth in fiscal year 2027 to remain below historical levels from a combination of subdued volume growth, negative mix from consumers choosing value offerings, and elevated competitive activity.

Clorox has done what it can to improve its margins and efficiency, but it remains in a highly challenging operating environment.

Clorox can afford its attractive dividend

On July 31, Clorox increased its quarterly dividend by a modest one cent per share from $1.24 to $1.25. However, given Clorox's challenges, it's prudent that Clorox keep the payout affordable while extending its consecutive dividend increase streak to 49 years.

In its Aug. 3 prepared remarks, Clorox said it expects strong cash flow generation in fiscal 2027, guiding to 11%-13% FCF as a percentage of net sales. Based on Clorox's net sales growth of 13% to 14% from $6.72 billion in fiscal 2026, the midpoint of Clorox's guidance suggests $7.63 billion in fiscal 2027 net sales and $915 million in FCF.

In fiscal 2025, Clorox paid $600 million in dividends on $4.80 per share, so a rough estimate for fiscal 2027 dividends of around $5 per share would be $625 million in dividend payments. Even with a high 5.1% yield Clorox should be able to generate ample cash to cover its dividend expense.

A top high-yield value stock for long-term investors

Clorox is an excellent value stock for investors to buy in August, especially those looking to supplement income in retirement. Clorox offers an incredibly attractive dividend and is on its way to becoming a Dividend King in 2027. As of July 2, 57 stocks qualified as Dividend Kings, putting Clorox in the running to join an elite group of companies that have paid and raised their dividends for at least 50 consecutive years.

Based on its Aug. 3 closing price of $98.26 per share, Clorox is trading at just 16.8 times the midpoint of its fiscal 2027 earnings per share guidance of $5.85. That's a dirt cheap valuation for a company with industry-leading brands across multiple product categories.

Clorox may lack the glitz and glam of a high-octane growth stock. But it's precisely the kind of deep value stock that long-term income investors look for.

Daniel Foelber has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.