Updated on February 15th, 2022 by Quinn Mohammed
The Dividend Aristocrats are some of the best dividend stocks an investor will find. These are companies in the S&P 500 Index, with 25+ consecutive years of dividend increases.
We believe the Dividend Aristocrats are among the highest-quality dividend growth stocks around. For this reason, we created a downloadable spreadsheet of all 66 Dividend Aristocrats, along with important metrics such as price-to-earnings ratios and dividend yields.
You can download the Excel sheet of all 66 Dividend Aristocrats by clicking the link below:
Each year, we review all of the Dividend Aristocrats. The next stock in the series is industrial giant Dover Corp. (DOV). Dover might not be a familiar stock for most investors, but it has certainly earned its place on the list.
Dover is not only a Dividend Aristocrat. It is also a Dividend King, an even smaller group of companies with 50+ consecutive years of dividend increases. There are just 39 Dividend Kings.
Dover has now increased its dividend for an amazing 66 consecutive years. The company’s dividend is also very safe.
At the same time, Dover stock has experienced a multi-year rally in share price. As an industrial stock, it has benefited from the steady economic growth since the Great Recession ended. The end result is that the stock appears to be overvalued, which is why right now might not be the best time to buy Dover stock.
Dover Corporation is a diversified global industrial manufacturer with annual revenues of nearly $8 billion and a market capitalization of $23 billion. Dover is composed of five reporting segments: Engineered Systems, Fueling Solutions, Pumps & Process Solutions, Imaging & Identification and Refrigeration & Food Equipment.
A little over half of revenues come from the U.S., with the remainder coming from international markets. Dover spun off its energy business, Apergy, at the beginning of May 2018.
Dover continued to perform well over the past year, despite the coronavirus pandemic’s negative impact on the global economy and supply chain.
Source: Investor Presentation
Dover reported fourth-quarter and full-year earnings results on 1/27/2022. Revenue of $2.0 billion grew 12% compared to the prior-year quarter. Adjusted earnings-per-share of $1.78 was 15% higher than the prior year.
For the year, revenue increased 18% to $7.9 billion. Adjusted earnings-per-share rose 35% to $7.63 in 2021. Organic sales were 11% higher for the quarter and 15% higher for the year.
By segment, Engineered Products improved 16% year-over-year as orders were higher across all businesses. Clean Energy and Fueling was 4% lower and Imaging & Identification sales increased 3%. Pumps & Process did tremendously well, sporting a 30% increase in organic revenue, and Climate & Sustainability Technologies sales rose 13% as demand for heat exchangers rose.
Overall, Dover performed very well in 2021 considering the economic damage caused by the pandemic and supply chain shortages. Bookings grew 22% in the fourth quarter, which bodes well going into 2022. Assuming the global economy continues to recover, the company should have another year of growth in 2022. Dover expects adjusted earnings-per-share of $8.45 to $8.65 for 2022.
Dover’s future growth will come from continued expansion of the global economy. As a diversified industrial manufacturer, Dover will naturally benefit from GDP growth. Besides organic growth in existing businesses, Dover’s earnings growth will also come from margin improvements thanks to its recent portfolio actions.
First, Dover launched an aggressive cost-cutting program to boost margins across its operating segments. The ambitious cost-reduction effort will also free up additional resources for investment in growth. Dover is active on the mergers and acquisitions front. Since 2014, Dover has spent billions on a number of bolt-on acquisitions.
Dover’s future growth prospects are accelerated by its portfolio reshuffling. The company launched a re-segmentation of its businesses. The goal of this re-segmentation is to increase efficiency and transparency across the organization.
Lastly, emerging markets are a long-term growth catalyst for Dover. Overall, we expect approximately 8% annual earnings-per-share growth for Dover through 2027.
Competitive Advantages & Recession Performance
No company can increase its dividend for 60+ years in a row, without durable competitive advantages. In Dover’s case, its competitive advantages include a large intellectual property portfolio, economies of scale, and a strong balance sheet.
Dover is in good financial condition. It has a long-term credit rating of BBB+ from Standard & Poor’s and Baa1 from Moody’s. High credit ratings help Dover keep its cost of capital low.
Dover is in a fortunate position; in that it generates high levels of cash flow. It can invest a significant portion of cash flow in acquisitions and capital expenditures, and also return cash to shareholders through dividends and buybacks.
Dover’s competitive advantages allow it to maintain consistent profitability each year, even during recessions. Dover’s earnings-per-share during the Great Recession are below:
- 2007 earnings-per-share of $3.22
- 2008 earnings-per-share of $3.67 (14% increase)
- 2009 earnings-per-share of $2.00 (45% decline)
- 2010 earnings-per-share of $3.48 (74% increase)
As a major industrial manufacturer, Dover is a bellwether for the global economy. As should be expected, it is not a highly recession-resistant company.
The deep economic downturn caused Dover’s earnings to nose-dive in 2009. However, the company only had one year of declining earnings during the recession. It returned to growth in 2010 and beyond. And its dividends continued to grow during this period of uncertainty.
Dividends continued to increase in 2021, proving once again the recession-resistant nature of Dover’s business model.
Valuation & Expected Returns
Based on expected EPS of $8.55 for 2022, Dover stock trades for a price-to-earnings ratio of 18.5, using the company’s earnings guidance. Dover held an average price-to-earnings ratio of 18.2 over the past 10 years. Dover stock appears to be overvalued, based on its average valuation multiples.
If Dover stock experiences a decline in the valuation multiple to the 10-year average P/E, it would reduce annual shareholder returns by 2.1% annually over the next five years.
Earnings growth and dividends will positively impact future returns. First, we expect the company to grow earnings-per-share by 8% per year through 2027.
Lastly, Dover stock has a dividend yield of 1.2%. Putting it all together, a breakdown of our expected future returns is as follows:
- 8.0% expected earnings-per-share growth
- 1.2% dividend yield
- -2.1% negative return from valuation contraction
In this projection, total shareholder returns could reach 6.9% annualized through 2027. This is a solid expected rate of return for this Dividend King.
Dover has endured a number of challenges over the past decade, including the Great Recession of 2008-2009, the oil and gas downturn in the past few years, and the coronavirus pandemic of 2020. And yet, it continued to raise its dividend each year. Very few companies have this ability, which makes Dover a rare dividend growth stock.
Dover has a leadership position in its industry, and durable competitive advantages. These factors have the company positioned for growth in future years, making it highly likely that Dover will continue to increase its dividend.
Dover is a high-quality business and a dividend growth company, but the stock is simply too overvalued to earn a buy rating from Sure Dividend at this time. That said, on a pullback, we would be buyers of this quality industrial stock.
Additionally, the following Sure Dividend databases contain the most reliable dividend growers in our investment universe:
- The Dividend Contenders List: 10-24 consecutive years of dividend increases.
- The Dividend Challengers List: 5-9 consecutive years of dividend increases.
- The Dividend Champions: Dividend stocks with 25+ years of dividend increases, including those that may not qualify as Dividend Aristocrats.
- The Dividend Achievers: dividend stocks with 10+ years of consecutive dividend increases.
- The Dividend Kings: considered to be the ultimate dividend growth stocks, the Dividend Kings list is comprised of stocks with 50+ years of consecutive dividend increases
If you’re looking for stocks with unique dividend characteristics, consider the following Sure Dividend databases:
- The Complete List of Monthly Dividend Stocks: stocks that pay dividends each month, for 12 payments over the year.
- The Blue Chip Stocks List: this database contains stocks that qualify as either Dividend Achievers, Dividend Aristocrats, or Dividend Kings.
The major domestic stock market indices are another solid resource for finding investment ideas. Sure Dividend compiles the following stock market databases and updates them monthly: