Mad Money

Cramer: Forget the Fed...This can matter more

Adam Jeffery | CNBC

Forget the Fed, Jim Cramer says. The way that a company is run can have a huge impact on its share price. At times, deployment of excess capital can matter even more.

Good 'ole fashioned value creation. No smoke and mirrors.

Jim Cramer was reminded of the value of dividends when he spoke with the CEO of Clorox, Donald Knauss, on Monday. Knauss was able to account for how well the stock has done in the past five years, simply because of dividends. He remembered that shareholders want a return of capital, and they deserve it.

Clorox had enough cash raised over the years from brands like Hidden Valley Ranch, Glad Bags and Pine-Sol, and knew it would pay off to show some love to shareholders in the form of dividends. Love was returned to the stock price in return and now Clorox grew its market capitalization from $7.7 billion to $13 billion, all while basically keeping revenues flat.

"Those ideologues who have spent the better part of their professional lives pooh-poohing this market over the last five years, dismissing it is all about the Fed, simply don't understand that it's still fair game for a company to make money for its shareholders by being a better-than-bond-market equivalent," said Cramer.

This way Clorox can return as much money as possible to shareholders. It also has a nice 2.9 percent yield. The yield has now created a sturdy alternative to Treasury bonds at a time when Treasury prices are ridiculously low and the consumer packaged goods industry has little growth.

Read more from Mad Money with Jim Cramer:
Cramer Remix: Stocks with years of upside
Howard Schultz: Best leaders come from the military
Cramer's military salute: Long-term investing themes

Three years ago Carl Icahn tried to get Clorox to put itself up for sale, citing that Knauss hadn't delivered. He discussed a $78 bid for the stock, back when it was in the $60's. He will be eating those words now that the stock stands at $101, a far better return than Icahn's offer.

At the end of the day, value creation doesn't have to be all about whipping up fancy games and relying on the Fed. Clorox shows that good old fashioned solid dividend boosts are a sustainable way to gain wealth creation, and show some love to the shareholders that really deserve it.

Call Cramer: 1-800-743-CNBC

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