Up to date on March twenty first, 2025 by Bob Ciura
Air Merchandise & Chemical compounds (APD) is probably not essentially the most well-known firm. It’s primarily a business-to-business producer and distributor of commercial gases.
Nonetheless, Air Merchandise & Chemical compounds is an elite dividend inventory as a member of the Dividend Aristocrats, a gaggle of dependable dividend shares with 25+ years of consecutive dividend will increase.
We consider the Dividend Aristocrats are among the many greatest dividend development shares to purchase for the long term.
With that in thoughts, we created a listing of all 69 Dividend Aristocrats, together with vital metrics like price-to-earnings and dividend yields.
You may obtain a replica of our Dividend Aristocrats checklist by clicking on the hyperlink under:
Disclaimer: Positive Dividend just isn’t affiliated with S&P International in any approach. S&P International owns and maintains The Dividend Aristocrats Index. The data on this article and downloadable spreadsheet relies on Positive Dividend’s personal evaluation, abstract, and evaluation of the S&P 500 Dividend Aristocrats ETF (NOBL) and different sources, and is supposed to assist particular person buyers higher perceive this ETF and the index upon which it’s primarily based. Not one of the info on this article or spreadsheet is official knowledge from S&P International. Seek the advice of S&P International for official info.
Air Merchandise & Chemical compounds’ dividend historical past – 43 years of consecutive dividend will increase – signifies that the corporate is a mannequin of consistency.
The corporate has reinvented itself in recent times. A by-product and a separate important divestiture had been applied with the aim of streamlining the corporate’s enterprise mannequin and specializing in its core industrial gasoline operations.
Air Merchandise & Chemical compounds seems poised to proceed elevating its dividend for a few years to return.
Enterprise Overview
Air Merchandise & Chemical compounds is among the largest producers and distributors of atmospheric and course of gasses on the earth. Its prospects embody different companies within the industrial, know-how, vitality, and supplies sectors.
Air Merchandise & Chemical compounds was based in 1940 and has a present market capitalization of ~$65 billion.
It additionally has a major worldwide presence. Roughly 40% of the corporate’s annual gross sales are generated within the U.S. and Canada, with the rest unfold throughout Latin America, Europe, and Asia.
Air Merchandise & Chemical compounds reported monetary outcomes for the primary quarter of fiscal 2025 in February. Income of $2.93 billion in the course of the quarter, declined 2.3% year-over-year, lacking the analyst consensus estimate by $10 million.
Supply: Investor Presentation
The corporate’s prices declined much more than revenues, which nonetheless allowed for some earnings development in comparison with the earlier 12 months’s quarter.
Air Merchandise & Chemical compounds was capable of generate earnings-per-share of $2.86 in the course of the first quarter, which was up 1% in comparison with the earlier 12 months’s interval. EBITDA was up 1% as effectively in the course of the interval.
Following a file 12 months in 2024, Air Merchandise & Chemical compounds is guiding for an additional file revenue in fiscal 2025, with earnings-per-share seen at $12.70 to $13.00. The steerage implies an earnings-per-share development price of round 3% this 12 months.
Progress Prospects
The streamlining initiatives undertaken by Air Merchandise & Chemical compounds prior to now a number of years have led to important profitability enhancements for the economic gasoline big. The corporate’s EBITDA margin development during the last a number of years might be seen under:
Air Merchandise & Chemical compounds has expanded its adjusted EBITDA margin by ~1400 foundation factors because the second quarter of 2014 – a major enchancment, which has mixed with rising adjusted EBITDA to drive larger earnings-per-share and dividends.
It should additionally develop because of worldwide growth, as the corporate’s Gases Asia enterprise has delivered the best development price within the latest previous, though its American enterprise stays the biggest section.
Air Merchandise & Chemical compounds has numerous development tasks both just lately accomplished or scheduled to be accomplished within the coming months.
Supply: Investor Presentation
Investments in NEOM will drive its inexperienced vitality publicity and increase its presence in Saudi Arabia, whereas Air Merchandise & Chemical compounds can be is increasing its hydrogen footprint in a number of markets, investing closely in recent times and for the foreseeable future on this trade in an effort to profit from the anticipated market development within the coming years.
These investments, coupled with margin development initiatives, ought to result in significant earnings development for the corporate over the approaching years. We count on 6% annualized EPS development over the following 5 years.
Aggressive Benefits & Recession Efficiency
Air Merchandise & Chemical compounds has numerous aggressive benefits. The primary and first benefit the corporate has is its dimension and market share.
Furthermore, the economic gasoline distribution enterprise advantages from excessive switching prices. These prices might not essentially be monetary – as an alternative, prospects are unlikely to modify as soon as their gasoline wants are being met by a selected provider as a result of it might be troublesome to discover a competitor that provides similar companies in a selected geographic area.
To that finish, Air Merchandise & Chemical compounds’ dimension additionally advantages the corporate.
The corporate’s latest divestitures and asset gross sales have given it an infusion of money, bolstering its company funds in a approach that ought to assist it endure any upcoming financial downturns. Furthermore, Air Merchandise & Chemical compounds has a observe file of performing fairly effectively throughout previous recessions.
Contemplate the corporate’s efficiency in the course of the 2007-2009 monetary disaster for proof of this:
2007 adjusted earnings-per-share: $4.40
2008 adjusted earnings-per-share: $4.97 (13% enhance)
2009 adjusted earnings-per-share: $4.06 (18.3% decline)
2010 adjusted earnings-per-share: $5.02 (23.6% enhance)
Air Merchandise & Chemical compounds skilled an 18.3% decline in adjusted earnings-per-share in 2009 in the course of the monetary disaster, however the firm’s backside line surged to a brand new excessive by 2010.
The corporate additionally remained extremely worthwhile in 2020, a troublesome 12 months for the worldwide economic system as a result of coronavirus pandemic.
The U.S. economic system entered a recession because of the pandemic, however Air Merchandise & Chemical compounds skilled solely a gentle dip in earnings, which allowed it to proceed elevating its dividend.
Valuation & Anticipated Complete Returns
With a 6% anticipated EPS development price, along with a 2.4% dividend yield, one may anticipate excessive single-digit annual returns from the safety.
Nonetheless, it’s crucial to think about how valuation can impression future returns.
Utilizing $12.85 because the anticipated fiscal 2025 adjusted earnings-per-share, and a share value of $291, the safety is at present buying and selling fingers at 22.6 occasions anticipated earnings.
For context, the inventory has traded at a median earnings a number of nearer to 19 during the last 10 years.
We consider that 20 occasions earnings is a good valuation estimate for Air Merchandise & Chemical compounds, which means shares are barely overvalued. Imply reversion to a price-to-earnings ratio of 20 might decrease annualized returns by -2.4% over a 5-year time horizon.
As such, we count on whole annual returns to include the next:
6% earnings-per-share development
2.4% dividend yield
-2.4% P/E a number of compression
We count on whole annual returns of 6.0% per 12 months via 2029.
Closing Ideas
Air Merchandise & Chemical compounds is a powerful dividend development inventory, having raised its dividend annually for the previous 43 years.
The corporate has de-risked its enterprise mannequin and that enterprise transformation permits it to deal with its core enterprise of commercial gases.
Furthermore, it has a big slate of latest tasks to assist keep on observe for development within the coming years. This could profit shareholders within the type of continued dividend will increase on an annual foundation.
With anticipated annual returns of 6%, we price the inventory as a maintain proper now.
In case you are fascinated by discovering extra high-quality dividend development shares appropriate for long-term funding, the next Positive Dividend databases will likely be helpful:
The most important home inventory market indices are one other strong useful resource for locating funding concepts. Positive Dividend compiles the next inventory market databases and updates them month-to-month:
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