I keep thinking how Donald Knauss, the CEO of Clorox (CLX) , could account for the stellar performance of his company's stock without ever increasing the revenue in any substantial way. He said it in one word: dividends.
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Shareholders want a return of capital, and they deserve it. Those old brands throw off so much capital that there's enough room for invention and dividends. His consistent hiking of the dividend has allowed a company with basically flat revenue over the past five years to go from a $7.7 billion market capitalization to a $13 billion one.
Why does this mean so much? Because those people who have spent the better part of their work lives pooh-poohing this market over the last five years, saying it is all about the Fed don't understand that it's still fair to make money being a bond-market equivalent.
Knauss said it was his job as CEO to create an environment that makes workers thrive -- who then do the most with the hand Clorox has, and then return as much money as possible to shareholders to give them a bond-market equivalent stock.
In other words, use the cash flow to the shareholders' advantage in order to create a steady alternative to U.S. Treasuries in a time when the industry has little to no growth.
It isn't not like Clorox has no growth. It can put on organic growth of 2% to 3%. But there has to be a point when pundits realize that just because a company doesn't have tremendous revenue doesn't mean its stock can't trade higher on the strength of its bountiful cash flow. By getting the most out of its brands and people, Knauss, who is retiring, got the most out of his stock.
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