Clorox is currently facing significant challenges, having dropped 37.9% in value, amid broader market conditions that have not favored the consumer staples sector. In 2025, this sector experienced a decline of 1.2%, a stark contrast to the S&P 500, which saw a robust gain of 16.4%. As a result, Clorox’s dividend yield has surged to 4.9%, presenting a compelling opportunity for contrarian investors eyeing value stocks in 2026.
The downturn in Clorox’s stock price stems from a series of self-inflicted hurdles amidst sector-wide slowdowns, such as decreased consumer spending and escalating costs driven by inflation and tariffs. The company has been engaged in a multiyear turnaround strategy aimed at maximizing brand value and streamlining internal processes to boost efficiency and profit margins.
Investors have endured a testing time as Clorox navigates this transition, marked by efforts to implement a new enterprise resource planning (ERP) system to modernize its outdated operational frameworks. These upgrades are essential not only for enhancing supply chain and financial functions but also for safeguarding against vulnerabilities such as cyberattacks, which became evident in 2023.
Despite these challenges, Clorox has tempered its expectations for fiscal 2026. It anticipates a decline in organic sales growth by 5% to 9%, attributing part of this downturn to the ERP transition, which has led to increased shipments in the previous fiscal year but diminished demand this year. Consequently, both sales and earnings are projected to drop significantly.
With its stock hovering near an 11-year low, Clorox appears poised for potential recovery in the coming years, contingent on the successful implementation of its strategic changes. The company operates with a market cap of $13 billion, and its financial health remains relatively stable with manageable debt levels, including less than $3 billion in long-term debt.
Management has indicated that while overall growth rates in consumer categories are stabilizing, they remain below historical averages amidst heightened competition and value-seeking behaviors among consumers. In response to changing consumer preferences, Clorox is modifying its offerings, providing smaller packaging for affordability and bulk options for better value.
Clorox holds a competitive advantage with around 80% of its brands ranked first or second in their respective categories. This includes notable brands such as Clorox itself, Hidden Valley Ranch, Pine-Sol, Fresh Step, Glad, Brita, and Burt’s Bees. The company’s strategy of maintaining and leveraging these leading brands is aimed at driving value, especially during challenging economic periods.
In the realm of passive income, Clorox stands out as a robust option for investors. Its recent dividend increase to $1.24 per share marks the 48th consecutive annual dividend hike, positioning Clorox on track to achieve Dividend King status by 2027. This achievement is notable, as companies recognized as Dividend Kings must raise their dividends for at least 50 consecutive years.
While Clorox’s growth has stagnated in the near term, its dividend remains sustainable, supported by earnings and free cash flow exceeding the dividend payout. Investors looking for a solid return from household and personal care products might also consider alternatives like Procter & Gamble, which presents lower risk and comparable yields.
However, for those willing to embrace a longer investment horizon of three to five years, Clorox represents a stock with considerable upside potential as it works through its challenges and positions itself to capitalize on future recovery in consumer spending. The company’s strategic shifts, such as the ERP transition and divestments in less profitable sectors, may ultimately enhance its market presence and profitability when economic conditions improve.
