Clorox CLX is an attractive dividend stock to buy today for several reasons. For starters, it currently offers income investors a 4% yield—and we think the dividend is not just secure but likely to grow at a mid-single-digit annual clip over the next decade. Second, we see opportunities for improved sales growth stemming from Clorox’s commitment to investing in its brands and capabilities through the cycle. And last, even though this dividend stock is up 20% in 2026 so far, it still looks 25% undervalued relative to our $163 fair value estimate.

Thanks to its entrenched retail standing and unrelenting focus on investing behind its leading brands, Clorox has withstood the onslaught of pressures from covid, supply chain issues, rampant inflation, and a 2023 cybersecurity attack. We like that Clorox’s strategy remains anchored in bringing consumer-valued innovation to market and touting its products to consumers, which we believe is particularly critical in the current environment of tepid consumer spending and intense competition.

Key Morningstar metrics for Clorox

  • Fair Value Estimate: $163
  • Star Rating: 4 Stars
  • Economic Moat Rating: Wide
  • Uncertainty Rating: Medium

Economic Moat rating

We believe Clorox ‘s wide moat is based on the strength of its eclectic brand mix and its entrenched position with leading retailers. We think its market leadership also underpins scale advantages. Return on invested capital including goodwill has averaged 42% over the last 10 years. Even as inflationary headwinds have dented marks recently, we have confidence that the company will generate excess returns for the next two decades. We forecast ROIC to average 35% annually over the next 10 years, about 5 times greater than our 7% cost of capital estimate.

Fair Value estimate for Clorox

Our $163 fair value estimate implies a 16 times enterprise value/adjusted EBITDA multiple on our fiscal 2026 forecast. For fiscal 2026, we expect a 6% retreat in organic sales and $6.30 in adjusted earnings per share. Our long-term assumptions include nearly 4% annual sales growth and high-teens operating margins. We expect gross margins in the mid-40s over our explicit forecast horizon. We forecast that around 10%-11% of sales will be spent on advertising and about 2% on research and development, equating to approximately $1 billion in aggregate investments annually.

Risk and uncertainty

The consumer packaged-goods sector is highly competitive. Consumers make frequent purchases and typically face no switching costs. Greater acceptance of private-label products, whether due to an economic downturn or shifting preferences, could threaten Clorox’s margins and/or sales growth. The company seems to be withstanding these pressures, but results could falter if its new products fail to resonate with consumers. Clorox is also subject to volatile input costs, which can pose a significant challenge. Not passing higher costs on to consumers could erode margins, but raising prices could hurt volume.

Clorox bulls say

  • Covid highlighted the necessity of Clorox’s disinfecting products. Continued stepped-up demand would aid cleaning sales, which equate to about one-third of Clorox’s base.
  • Clorox’s system upgrade is poised to deliver significant enhancements to decision-making and demand planning.
  • The sale of the vitamin, mineral, and supplements arm should boost margins and allow management to focus on its core brands.

Clorox bears say

  • Promotional spending has plagued categories like litter, bags, and wraps, and we think these headwinds could resume in a dreary economic environment.
  • Private-label penetration tends to be significant in categories where Clorox operates; volume could be hindered if consumers trade down to lower-price alternatives.
  • The combination of inflation and tariffs (which management has said could add $40 million in costs on a 12-month basis) may constrain margins.

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