Air Products & Chemicals: A Hidden Gem in the Dividend Aristocrats
When it comes to hidden gems in the world of dividend stocks, Air Products & Chemicals (APD) stands out. While it may not be a household name, this business-to-business manufacturer and distributor of industrial gases has quietly built a reputation as an elite dividend stock. As a proud member of the prestigious Dividend Aristocrats club, which consists of companies with 25 or more years of consecutive dividend increases, APD is a beacon of consistency and reliability.
To shed some light on the world of Dividend Aristocrats, we have curated a list of all 69 companies, complete with essential metrics like price-to-earnings ratios and dividend yields. This comprehensive list can be accessed by clicking on the link below.
While APD’s dividend track record speaks for itself – an impressive 43 years of consecutive dividend increases – the company has also undergone significant transformation in recent years. Strategic spinoffs and divestitures have streamlined its business model, allowing it to focus on its core operations in the industrial gas sector. This strategic shift positions Air Products & Chemicals for continued dividend growth in the years to come.
Business Overview
Founded in 1940, Air Products & Chemicals is a global leader in the production and distribution of atmospheric and process gases. With a market capitalization of approximately $65 billion, the company serves a wide range of customers in industrial, technology, energy, and materials sectors. While a significant portion of its sales is generated in the U.S. and Canada, Air Products & Chemicals also has a strong international presence in Latin America, Europe, and Asia.
Financial Performance
In its latest financial update for the first quarter of fiscal 2025, Air Products & Chemicals reported a revenue of $2.93 billion, a slight decline from the previous year. However, cost management measures allowed the company to achieve earnings-per-share growth of 1% compared to the same period last year. With a robust outlook for fiscal 2025, Air Products & Chemicals expects to deliver another record profit, with earnings-per-share projected to grow by around 3% this year.
Growth Prospects
The company’s focus on streamlining operations and international expansion has bolstered its profitability, as evidenced by a significant improvement in its EBITDA margin over the past few years. Additionally, strategic investments in growth projects, such as expanding its hydrogen footprint and green energy exposure, position Air Products & Chemicals for sustained earnings growth in the future. We anticipate a solid 6% annualized earnings-per-share growth over the next five years.
Competitive Advantages & Recession Performance
Air Products & Chemicals benefits from its size, market share, and high switching costs in the industrial gas distribution business. These factors, combined with a strong track record of performance during past recessions, underscore the company’s competitive advantages and resilience in challenging economic environments.
Valuation & Expected Total Returns
While Air Products & Chemicals offers a compelling dividend yield and growth prospects, its current valuation suggests that shares may be slightly overpriced. Mean reversion to a more reasonable price-to-earnings ratio could impact future returns. Based on our analysis, we expect total annual returns of 6.0% through 2029.
In conclusion, Air Products & Chemicals represents a solid dividend growth stock with a proven track record of reliability and resilience. Despite some valuation concerns, the company’s strategic initiatives and growth projects position it well for continued success in the industrial gas sector. With expected annual returns of 6%, Air Products & Chemicals is a stock worth considering for long-term investors.
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