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Dividend Aristocrats In Focus: C.H. Robinson Worldwide

Updated on March 22nd, 2024 by Bob Ciura

In the realm of dividend investing, the Dividend Aristocrats are the crème de la crème. The Dividend Aristocrats are a group of stocks in the S&P 500 Index with 25+ consecutive years of dividend increases.

Achieving Dividend Aristocrat status is a rare feat, with only 68 companies currently holding this distinction.

The Dividend Aristocrats list is highly selective. With that in mind, we’ve put together a downloadable list of all 68 Dividend Aristocrats, containing crucial metrics like dividend yields and price-to-earnings ratios.

You can download a free copy of the Dividend Aristocrats list by clicking on the link below:


Disclaimer: Sure Dividend is not affiliated with S&P Global in any way. S&P Global owns and maintains The Dividend Aristocrats Index. The information in this article and downloadable spreadsheet is based on Sure Dividend’s own review, summary, and analysis of the S&P 500 Dividend Aristocrats ETF (NOBL) and other sources, and is meant to help individual investors better understand this ETF and the index upon which it is based. None of the information in this article or spreadsheet is official data from S&P Global. Consult S&P Global for official information.

While there are countless options for dividend stocks, the Dividend Aristocrats are in a league of their own. These companies have a track record of being financially stable and generating consistent cash flow, with the ability to grow their profits over time. This makes them resilient during economic downturns and able to consistently raise their dividends each year.

C.H. Robinson Worldwide, Inc. (CHRW) is a recent addition to the Index. The company recently announced its 25th consecutive annual dividend increase and currently offers a yield of 2.5%.

Despite the transportation industry being rather cyclical, C.H. Robinson Worldwide’s mission-critical logistics solutions have allowed it to generate resilient results over the years and thus afford consistent dividend increases. Therefore, C.H. Robinson could be a fitting stock for income-oriented investors.

Business Overview

C.H. Robinson Worldwide is a transportation and logistics giant that has been around since the early 1900s. Founded by Charles Henry Robinson, the company has grown to become a Fortune 500 provider of multimodal transportation services and third-party logistics.

From freight transportation and transportation management to brokerage and warehousing, CHRW offers a wide range of services to help its clients move their goods. Whether it’s by truckload, air freight, intermodal, or ocean transportation, the company has the expertise to get the job done.

On January 31st, 2024, C.H. Robinson Worldwide reported results for the fourth quarter for Fiscal Year 2023. The
company faced challenges in Q4 2023, evident by a 20.0% drop in gross profits and a 34.5% decline in income from operations.

The full-year picture was similarly difficult, with a 27.9% decrease in gross profits and a notable 59.4% decline in income from operations. CEO Dave Bozeman acknowledged the impact of a poor demand and pricing environment.

Despite the challenges, strategic measures such as targeting more truckload volume in the spot market led to sequential improvements in overall truckload profit per load. However, December saw a decline due to higher seasonal transportation costs.

Bozeman highlighted achievements in productivity, including a 17% increase in NAST shipments per person per day. Expressing confidence in overcoming challenges, the company aims to optimize structural costs and position itself for a freight market rebound.

Q4 2023 financials revealed a 16.7% decrease in total revenues, a 20.0% drop in gross profits, and a 34.5% decline in income from operations. A 55.3% effective tax rate contributed to a 67.8% decrease in net income and a 67.5% decline in diluted EPS.

Growth Prospects

C.H. Robinson has grown revenue by 5.1% annually over the past 10 years. Earnings per share have increased by 10.0% over the past five years. We expect annual earnings growth to be 4% for the next five years with the newly purchased Prime Distribution Services’ help.

C.H. Robinson adds great value to its customers through its efficient Freight & Logistics brokerage services, which are gradually capturing a larger chunk of the underlying U.S. freight market. In fact, as the industry has been shifting from asset-based trucking to brokers such as C.H. Robinson, brokerage penetration over the past two decades has nearly quadrupled.

Another growth driver for the company includes its digital transformation, which should help scale its operations further. This includes C.H. Robinson providing meaningful products, features, and insights to both sides of the two-sided freight marketplace, which translates to unique information advantages for its customers.

Finally, C.H. Robinson should continue to leverage its scale to capitalize on the growing freight market, expanding its unique global footprint. For fiscal 2024, we expect earnings-per-share of about $3.20, implying a small decline from 2023.

Competitive Advantages & Recession Performance

The integrated Freight & Logistics can be cyclical, resulting in fluctuating results for companies in the space as the demand for transportation can vary based on underlying economic conditions. That said, being the preferred partner in the industry, C.H. Robinson has managed to generate resilient results over the decades.

When it comes to competition, C.H. Robinson is in a league of its own. The company has built a network that is second to none thanks to its efficiency and effectiveness. But what really sets it apart is the massive barrier to entry that new or small competitors would face.

Building a network that can rival C.H. Robinson’s would take a huge amount of capital, and that’s something that not many companies have. In other words, C.H. Robinson has a wide economic moat that makes it hard for others to compete with them. This is why they are considered one of the best in the industry.

C.H. Robinson’s ability to continue growing its earnings even under adverse economic conditions was greatly illustrated during the Great Financial Crisis:

As a matter of fact, it has an unbroken streak of profitability dating back to 1996 and has never once posted a loss in any quarter since. This is a remarkable achievement and a testament to the robustness of its business model.

Valuation & Expected Returns

We expect that C.H. Robinson will earn $3.20 per share in the fiscal year 2024. The stock has a price-to-earnings ratio of 23.4. This is significantly above our fair value P/E estimate of 15.0. A declining price-to-earnings ratio could reduce annual returns by -8.5% per year over the next five years.

In addition, C.H. Robinson has a dividend yield of 3.3%, and the dividend payout appears to be well-covered by earnings. A breakdown of potential returns is as follows:

In total, we believe C.H. Robinson could produce negative annual returns of -1.2% over the next five years.

Final Thoughts

C.H. Robinson has managed to deliver an excellent track record of growth, consistent profitability, and rising dividends for many years, but the company is seeing declines coming off record results during the pandemic.

The stock has an attractive dividend yield above 3%, and a long history of annual dividend increases. That said, dividend growth is likely to slow, given the steep decline in the company’s earnings.

In addition, shares seem to be significantly overvalued based on the company’s reduced earnings power. We forecast that C.H. Robinson stock will generate negative annual returns, making the stock a sell in our view.

The following articles contain stocks with very long dividend or corporate histories, ripe for selection for dividend growth investors:

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