Dividend Growth Investing Doesn’t Go Out of Style

With markets focused on tech plays, favorite short squeezes by masses of retail players, and other potential news-driven events, the relative boredom of dividend investing seems to have passed the market by.

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  • That’s creating some pockets of opportunity. Only a handful of companies came through 2020 with their dividends intact… or even increasing. Investing in these companies for the long haul may sound boring, but a dividend boost can sometimes lead to a short-term boost in shares too.

    One such company is Clorox (CLX). An investor darling at the beginning of the pandemic, shares have fallen somewhat out of favor. Now, they’re near a six-month low and a potential double-bottom in shares before a move higher.

    In the meantime, the company just increased its quarterly dividend payment by 5 percent to $1.16 per share, up from $1.11. That’s not something bonds do.

    Besides being oversold and potentially ready to move higher on a technical level, shares are trading at about 23 times forward earnings, their cheapest point in nearly two years. With a new current yield close to 2.6 percent and with more dividend hikes in the future, this could be a good long-term entry point.

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  • Action to take: For dividend-minded investors, shares look attractive up to $185. For those inclined to see a rally with shares looking oversold in the short-term, an options trade may fare better.

    The October 2021 $185 calls, going for about $6.10, have the potential for a mid-double digit move higher in the coming weeks if shares have a strong bounce from here. Traders should look for quick profits, and to close well before expiration.

     

    Disclosure: The author of this article has no position in the stock mentioned here, and does not intend to trade this company after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.

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