Up to date on September thirteenth, 2023 by Nate Parsh
Whereas there are lots of dividend-paying shares available in the market, there are solely 50 shares which have provided a rising dividend for at the very least 50 consecutive years. This unique group of shares are known as the Dividend Kings.
You possibly can see the complete downloadable spreadsheet of all 50 Dividend Kings (together with vital monetary metrics reminiscent of dividend yields, payout ratios, and price-to-earnings ratios) by clicking on the hyperlink beneath:
Earlier this 12 months, Common Company (UVV) raised its dividend for the 53rd 12 months in a row. This text will overview the corporate to find out if the inventory earns a purchase suggestion right this moment.
Common Company is the most important exporter and importer of tobacco leaves on the planet. The corporate is a wholesale purchaser and processor of tobacco and operates as a go-between for farms and the businesses that manufacture cigarettes, pipe tobacco, and cigars. Common Company has been in enterprise since 1886 and is headquartered in Richmond, Virgina.
Common Company has an intensive attain all over the world.
Supply: Investor Presentation
Common Company has a presence in additional than 30 international locations and employs in extra of 20,000 everlasting and seasonal workers.
Common Company has had a troublesome couple of years as earnings-per-share really declined from 2010 to 2023. There have been years of sporadic development, however total EPS has declined in that 13-year interval.
Nonetheless, there are some vibrant spots to the corporate’s enterprise that might result in future returns, to not point out a really interesting dividend yield which presently stands at practically 7%.
As the most important exporter and importer of leaf tobacco on the planet, Common Company presents a measurement and scale that rivals can not match.
Which means the corporate can depend the most important tobacco product producers on the planet amongst its clients.
Supply: Investor Presentation
Six of Common Company’s high clients are among the many largest tobacco producers on the planet. These corporations management greater than four-fifths of the worldwide tobacco market.
Greater than 60% of Common Company’s annual income normally comes from these clients. Counting the most important names within the sector as clients possible implies that the overwhelming majority of revenues will be relied upon. This gives the corporate some stability and may reassure shareholders that the enterprise will be sustainable.
Common Company additionally strives to supply most of its gross sales to satisfy anticipated demand. Which means the corporate targets its stock to clients with dedicated gross sales orders. This enables Common Company to not be caught holding merchandise or being compelled to promote at a cheaper price with a purpose to scale back stock.
Lastly, as smoking charges decline within the U.S. and elsewhere, corporations within the tobacco sector should work out different methods to develop income.
Supply: Investor Presentation
Common Company is trying to do exactly that. The corporate made its first such acquisition earlier in 2020 when it added FruitSmart Inc. to its portfolio. FruitSmart processes fruit and vegetable elements and markets them to clients all over the world.
Subsequent, Common acquired Silva Worldwide, a privately-held dehydrated vegetable, fruit, and herb processing firm. Silva procures greater than 60 forms of dehydrated greens, fruits, and herbs from over 20 international locations all over the world.
The corporate continues to make bolt-on acquisitions, such because the purchase of Shank’s Extracts, a privately-held specialty ingredient, flavoring, and meals firm with a portfolio of over 2,400 extracts, distillates, pure flavors, and colours.
Diversifying the enterprise is a really prudent transfer, in our opinion, because the variety of people who smoke declines with every passing 12 months.
Aggressive Benefits & Recession Efficiency
Common Company’s chief enterprise tends to see a dependable client, even when tobacco utilization has declined. Shoppers who do smoke are prone to search out tobacco merchandise whatever the state of the financial system. This makes enterprise dependable even in an unreliable time.
Whereas earnings development has been weak in recent times, Common Company navigated the final recession very properly. The corporate’s earnings-per-share earlier than, throughout, and after the Nice Recession are listed beneath:
- 2006 adjusted earnings-per-share: $3.48
- 2007 adjusted earnings-per-share: $4.02 (15.5% improve)
- 2008 adjusted earnings-per-share: $4.32 (7.5% improve)
- 2009 adjusted earnings-per-share: $5.68 (31.5% improve)
- 2010 adjusted earnings-per-share: $5.30 (6.7% lower)
- 2011 adjusted earnings-per-share: $3.25 (38.7% lower)
- 2012 adjusted earnings-per-share: $4.66 (43.4% improve)
Common Company’s earnings-per-share improved greater than 41% from 2007 by means of 2009 throughout what was a really troublesome surroundings for a lot of corporations available in the market.
Earnings-per-share didn’t begin to endure their steep decline till after the worst a part of the recession had taken place. It ought to be famous that the corporate nonetheless has not taken out its 2009 excessive for annual earnings-per-share.
Typically, we consider that the comparatively resilient demand for tobacco leaves will hold producing comparatively strong outcomes for the corporate even throughout difficult financial durations. This was demonstrated once more each in the course of the COVID-19 pandemic in 2020 and the present robust macroeconomic panorama.
Valuation & Anticipated Returns
Like all shares, Common Company’s complete returns will encompass dividend funds, earnings development, and valuation modifications. Utilizing the annualized dividend of $3.20, shares of Common Company yield 6.8%.
The dividend payout ratio has climbed steadily in recent times. The payout ratio was 84% in fiscal 2023, however the projected payout ratio for this fiscal 12 months is a barely extra cheap 70%. We don’t consider a dividend minimize is imminent, however do advise warning as regards to the dividend. On the very least, it’s possible dividend development might be weak till earnings development accelerates.
Because of the firm’s somewhat weak efficiency for profitability during the last 10 years, we anticipate modest earnings development of simply 1.5% yearly over the subsequent 5 years. Nonetheless, this can positively contribute to shareholder returns.
Lastly, growth of the valuation a number of is just not unlikely in our view. With anticipated earnings-per-share of $4.60 for fiscal 12 months 2024, shares are buying and selling with a price-to-earnings ratio of 10.2. With our goal valuation of 12 occasions earnings, a number of growth might add 3.3% yearly to returns over the subsequent 5 years.
Subsequently, anticipated complete returns would encompass the next:
- 1.5% earnings development
- 6.8% dividend yield
- 3.3% a number of growth
In complete, we count on annual returns of 10.1% over the subsequent 5 years. That is sufficient of a projection to warrant a purchase score for Common Company. We notice that the inventory has a sure degree of enchantment for revenue buyers because of the very excessive yield, even when dividend development is prone to stay muted.
Common Company is among the newer additions to the Dividend Kings. There are solely 50 corporations which have the required 50+ years of dividend development to achieve membership into this unique group.
Common can be a excessive dividend inventory, with a yield approaching 7%.
Whereas Common Company presents a excessive yield, it additionally has had issue rising earnings in additional than a decade, which in flip has brought about the dividend development charge to gradual significantly as properly.
The corporate’s dividend development has not been accompanied by earnings development, which has resulted in a better dividend payout ratio. The excellent news is that the anticipated payout ratio for the present fiscal 12 months ought to be decrease than earlier years.
As well as, complete return potential earns Common Company a purchase score from Certain Dividend.
The next articles comprise shares with very lengthy dividend or company histories, ripe for choice for dividend development buyers:
Thanks for studying this text. Please ship any suggestions, corrections, or inquiries to [email protected].
#Dividend #Kings #Focus #Common #Company #Dividend