Up to date on March twenty seventh, 2024 by Bob Ciura
There are simply 68 shares on the listing of Dividend Aristocrats, members of the S&P 500 Index which have raised their dividends for 25+ consecutive years.
We view the Dividend Aristocrats as among the many finest dividend shares to buy-and-hold for the long term.
You’ll be able to obtain a free listing of all 68 Dividend Aristocrats, together with essential metrics like dividend yields and price-to-earnings ratios, by clicking on the hyperlink beneath:
Disclaimer: Positive Dividend shouldn’t be affiliated with S&P International in any manner. S&P International owns and maintains The Dividend Aristocrats Index. The knowledge on this article and downloadable spreadsheet is predicated on Positive Dividend’s personal evaluate, abstract, and evaluation of the S&P 500 Dividend Aristocrats ETF (NOBL) and different sources, and is supposed to assist particular person buyers higher perceive this ETF and the index upon which it’s based mostly. Not one of the info on this article or spreadsheet is official information from S&P International. Seek the advice of S&P International for official info.
Ecolab (ECL) is an instance of an organization that possesses all of those qualities. Ecolab has an extended historical past of development, and has elevated its dividend for over 30 years.
This text will look at the assorted components behind Ecolab’s rise to prominence, in addition to our present score of Ecolab inventory.
Enterprise Overview
Ecolab was created in 1923 when its founder Merritt J. Osborn invented a brand new cleansing product referred to as “Absorbit”. This product cleaned carpets with out the necessity for companies to close down operations to conduct carpet cleansing. Osborn created an organization revolving across the product, referred to as Economics Laboratory, or Ecolab.
As we speak, Ecolab is the business chief and generates annual gross sales of roughly $15 billion.
Ecolab operates three main enterprise segments: International Industrial, International Institutional, and International Power, every of roughly equal measurement. The enterprise is diversified by way of working segments and likewise geography. About 55% of the corporate’s gross sales happen outdoors North America.
Supply: Investor Presentation
In mid-February, Ecolab reported (2/13/24) monetary outcomes for the fourth quarter of fiscal 2023. Natural gross sales grew 6% over the prior 12 months’s quarter, largely because of double-digit development within the Institutional section and pest elimination.
Due to sturdy value hikes and barely decrease prices of merchandise, adjusted earnings-per-share grew 22%, from $1.27 to $1.55, and exceeded the analysts’ consensus by $0.01. Furthermore, because of strong pricing and optimistic gross sales momentum, administration offered steerage for earnings-per-share of $6.10-$6.50 in 2024, implying 17%-25% development.
It additionally expressed its confidence in increasing the working margin from 16% to twenty% within the upcoming years.
Development Prospects
Ecolab grew its earnings-per-share by 10.9% per 12 months throughout 2011-2019. It incurred a decline in 2020 as a result of pandemic and in 2022 as a consequence of excessive inflation. We view these headwinds as momentary and anticipate 12% common annual development of earnings-per-share over the following 5 years.
Supply: Investor Presentation
One of many firm’s most essential development catalysts is acquisitions. In late 2021, Ecolab acquired Purolite for $3.7 billion in money. Purolite sells high-end ion change resins for the separation of options in over 30 international locations. It generates annual gross sales of roughly $400 million.
Ecolab has confirmed profitable at integrating different acquisitions, so we stay optimistic in regards to the firm’s capacity to take action sooner or later. Acquisitions reminiscent of these, together with natural funding, have fueled regular earnings development for many years.
We really feel that the corporate is well-positioned to proceed to develop. We anticipate ECL to develop earnings-per-share by 12% per 12 months over the following 5 years.
Aggressive Benefits & Recession Efficiency
Ecolab’s many aggressive benefits embrace scale, a robust repute amongst its clients, and innovation. Ecolab serves greater than 1 million buyer places unfold throughout greater than 170 international locations. The corporate shouldn’t be afraid to spend important assets on analysis and growth of recent services.
Administration refers to R&D spending as its “innovation pipeline”. Ecolab usually spends greater than $1 billion on the innovation pipeline. Due largely to this R&D spend, the corporate’s variety of patents exceeds 9,000.
Ecolab’s R&D investments and mental property assist the corporate keep forward of the competitors. Ecolab’s R&D investments have created an extremely sturdy enterprise, one that may maintain up very effectively even throughout financial downturns.
For clear proof of Ecolab’s aggressive benefits, look no additional than its efficiency in the course of the Nice Recession:
- 2006 earnings-per-share of $1.43
- 2007 earnings-per-share of $1.66 (16% enhance)
- 2008 earnings-per-share of $1.86 (12% enhance)
- 2009 earnings-per-share of $1.99 (7% enhance)
- 2010 earnings-per-share of $2.23 (12% enhance)
Ecolab’s development in the course of the Nice Recession was actually outstanding. Not solely did the corporate generate optimistic earnings development in every year of the recession, however in three of these years, it achieved double-digit earnings development.
Valuation & Anticipated Returns
Primarily based on the present buying and selling value of $230 and anticipated earnings-per-share of $6.40, Ecolab has a price-to-earnings ratio of 35.9. The inventory has a ten-year common price-to-earnings ratio of 20. We have now a goal price-to-earnings ratio of 20. If shares of Ecolab have been to return to our goal valuation by 2029, this would scale back complete returns by 11.0% per 12 months.
The inventory is at risk of experiencing a contraction of the valuation a number of, which might negatively impression complete returns. Ecolab’s dividend shouldn’t be prone to signify a big portion of complete returns. It is because the present dividend yield is simply 1.0%. That is decrease than the typical dividend yield of the S&P 500 Index.
Ecolab’s dividend development streak now totals 32 consecutive years.
A breakdown of potential five-year returns is as follows:
- 12.0% earnings development
- 1.0% dividend yield
- 11% valuation reversion
We anticipate that Ecolab will supply a complete annual return of two.0% by means of 2029. Principally, we anticipate that valuation headwinds are fairly probably going to put on down a lot of the firm’s potential returns that may emerge from its earnings and dividend development prospects.
Whereas Ecolab is a lovely dividend development inventory as a consequence of its excessive fee of dividend will increase, it’s not as interesting for earnings buyers or worth buyers.
Ultimate Ideas
Ecolab shouldn’t be prone to be a lovely inventory for buyers solely in excessive ranges of earnings. That stated, it’s a very sturdy inventory for buyers all for a recession-resistant enterprise and dividend development.
Ecolab has a wonderful monitor document of profitability and development and is among the few corporations to have a dividend development streak of not less than 25 years. That stated, at the moment may not be a really perfect time to amass shares within the firm as a result of lack of significant projected returns over the medium time period. Subsequently, we fee shares of Ecolab as a Maintain.
If you’re all for discovering high-quality dividend development shares appropriate for long-term funding, the next Positive Dividend databases will likely be helpful:
The most important home inventory market indices are one other stable useful resource for locating funding concepts. Positive Dividend compiles the next inventory market databases and updates them month-to-month:
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