VSMV - Clorox May Be At Risk Of Cutting Its Dividend

• Clorox is a highly profitable and well-managed company. This is underscored by consistently high margins, excellent working capital management, and return on invested capital.
• Due to inflationary pressures and pandemic-related excess capacities, the company's gross margin has fallen dramatically.
• Free cash flow followed suit and is now barely able to cover the dividend.
• The company will likely need to tap the capital markets to bolster its near-term cash flow, in addition to refinancing more than $1 billion over the next 18 months at potentially unfavorable rates.
• It will take a few years for the issues to resolve, and investors will likely continue to scrutinize Clorox's premium valuation.

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