There are thousands of publicly traded companies, but the stock market is anchored by large, established businesses. They can also anchor your portfolio. Many of these businesses have reliable revenue sources and well control the factors that are available. This allows them to return value to shareholders through short-term redemption of shares or long-term dividend flows. And this can go a long way to help you build wealth.
We recently asked Motley Fool's three contributors to lead the aristocrat of their radar dividends. That's why they chose the energy major (19459005] (NYSE: APD) (19459008) (NYSE: ECL) (19459008) and a house for spices and fragrances McCormick (NYSE: MKC) .
Maxx Chatsko (Air Products & Chemicals): They are easy to ignore, but industrial gases drive many of the goods and services that make life possible, from research at universities to massive silicone wafer factories. The extraction, processing, compression and transport of all these gases – whether carbon dioxide and oxygen or more exotic gases such as xenon and crypton – requires a special kind of expertise. Air Products & Chemicals is too happy to serve this niche.
The $ 50 billion gas and equipment provider has been impressive lately. During the fiscal third quarter of 2019, the business delivered a record-adjusted earnings per share. For the nine months ended June 30, it reported flat revenues compared to last year but managed to raise operating income over 7% to $ 1.54 billion during this period. He enjoyed a significant boost to the gross margin and managed to reduce sales and administrative costs. In fact, profits could be even higher if not for $ 54 million of one-off costs associated with facility closure and cost savings. Although the currency quilts and the strong dollar weighed the business periodically in recent years, investors were happy with the overall trajectory. It aggressively pursues and gains new contracts without jeopardizing its long-term financial goals, taking advantage of the ongoing global helium shortage and introducing new production capacity to meet customer needs.
The company has increased investment in research and development by nearly 14% last year. In addition, it aggressively seeks to harness vehicles that can or can not be avoided, but can not go wrong with the business.
The most important thing is that investors will find comfort in the company's long experience of winning the return on S & P 500 when dividends are included. Shares of air products and chemicals can only bring 2%, but as a dividend aristocrat, it increases its payouts annually for more than 25 consecutive years.
Slowly and steadily wins the race
Ecolab: Ecolab is a constant business that I have long admired. The company sells various sanitary and cleaning solutions to a diverse customer base. This may not be an exciting business, but it is very predictable, as its customers must always maintain basic standards of purity to keep their employees and customers healthy. This fact allows Ecolab to squeeze a steady growth in earnings and profits, which Wall Street rewards with a steadily rising share price.
So how can Ecolab keep these trends intact? The leadership has many levers that can pull to ensure that everything continues to move in the right direction
First, the company has a long history of investing in research and development to help launch new products. Secondly, management uses its financial strength to buy additional businesses. Third, Ecolab insists on modest price increases. Fourthly, management shows operational efficiency to improve margins. Finally, permanent share buyouts help to reduce the number of shares over time.
Wall Street believes that these low-risk strategies will allow for a profitable growth of over 13% a year over the next five years. This is an impressive figure for a mature business. Growth in net income should allow it to continue its long history of raising dividends. The payout has been growing every year since 1986, making it easy to qualify as a dividend aristocrat.
Currently, stocks are not incredible deals – stock trading for about 30 times earnings forecasts next year – but I think Ecolab is such a high-quality business that investors can still make good profits here, although they need to pay a premium to get in.
Demetri Kalogeropoulos (McCormick): Thanks to the long period of rising income, Americans now spend more on food in restaurants than on food that they prepare for. home. This long-term trend hurt many specialists in packed food, but not the McCormick spice giant and flavor. In fact, the company reported double-digit sales growth and rising profitability in its last fiscal year.
Certainly, most of these profits are from McCormick's recent acquisition of new brands such as French spices and Frank Sauce. But the dividend giant, which has dozens of franchises for spices, herbs, spices and flavors, is still superior to the industry with its main brands.
McCormick strives for an organic sales growth of about 5% each year and is on the pace to achieve this target in 2019. However, managers are forecasting faster gains ahead due to aggressive marketing costs across this year. In the meantime, income investors may expect higher dividend increases due to McCormick's increasing profit margins and falling debt weight. These financial gains have put the company on much more dividend increases ahead of 2018, marking the 33nd consecutive year of the annual Dividend Aristocrat rallies.