Clorox expects modest organic sales growth in fiscal 2027, but it'll absorb extra costs as it integrates a recent acquisition.
Debt has doubled to about $5 billion.
The stock offers a high 5.8% yield, but the payout ratio is elevated relative to earnings.
Shares of Clorox (NYSE: CLX), the maker of Clorox bleach and Purell hand sanitizer, trade about 9% above their 52-week low of $79.12 and down about 27% over the past year. A beaten-down household name with a high yield can look like a bargain. The problem is that the business is still under real pressure, which is why investors may want to stay away for now.
Organic sales, which exclude acquisitions, fell 8% in fiscal 2026, mostly because Clorox was lapping extra shipments to retailers in the previous year. Management expects organic growth of 3.5% to 4.5% in fiscal 2027, which is an improvement, but other problems may continue to weigh on the stock.
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The purchase of GOJO, the maker of Purell, should add about 9.5 points to fiscal 2027 net sales. But one-time deal costs will hit product manufacturing, and selling and administrative expenses will weigh on margins.
Image source: Getty Images.
Meanwhile, total debt roughly doubled over the past year to about $5.1 billion. The dividend yields about 5.8%, but the company's payout ratio -- the amount of dividends paid relative to earnings -- is elevated at 103%, which isn't sustainable unless earnings grow.
CEO Linda Rendle expressed caution for the next year: "As we begin fiscal year 2027, we expect the operating environment to remain challenging, with continued cost volatility and a value-seeking consumer."
At about 15 times fiscal 2027 consensus earnings estimates, the stock isn't expensive. Still, given flat sales, GOJO integration costs, higher debt, and a stretched dividend payout ratio, investors may want to wait before buying shares.
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John Ballard 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.