Up to date on October eighth, 2021 by Bob Ciura
Whereas there are various dividend paying shares out there, there are solely 32 shares which have provided a rising dividend for a minimum of 50 consecutive years. This unique group of shares are known as the Dividend Kings.
You may see the complete downloadable spreadsheet of all 32 Dividend Kings (together with vital monetary metrics similar to dividend yields, payout ratios, and price-to-earnings ratios) by clicking on the hyperlink under:
Earlier this yr, Common Company (UVV) raised its dividend for the 51st yr in a row. This text will evaluate the corporate to find out if the inventory earns a purchase suggestion in the present day.
Common Company is the biggest exporter and importer of tobacco leaf on this 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, VA.
Common Company has 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 2020. There have been years of sporadic development, however total EPS has declined in that 10-year interval.
Nonetheless, there are some brilliant spots to the corporate’s enterprise that might result in future returns, to not point out a really interesting dividend yield.
As the biggest exporter and importer of leaf tobacco on this planet, Common Company provides a dimension and scale that rivals can not match.
Which means the corporate can depend the biggest tobacco product manufactures on this planet amongst its clients.
Supply: Investor Presentation
Six of Common Company’s high clients are among the many largest tobacco manufactures on this planet. These corporations management greater than four-fifths of the worldwide tobacco market.
Three-quarters of Common Company’s annual income normally comes from these clients. Counting the biggest names within the sector as clients possible signifies that the overwhelming majority of revenues may be counted on annually. This supplies the corporate some stability and may reassure shareholders that the enterprise may be sustainable.
Common Company additionally strives to supply nearly all of its gross sales to satisfy anticipated demand. Which means the corporate targets a majority of its stock to clients with dedicated gross sales orders. This permits Common Company to not be caught holding product or being pressured to promote at a lower cost to be able to scale back stock.
Lastly, as smoking charges have declined within the U.S. and elsewhere, corporations within the tobacco sector have to determine different methods to develop revenues.
Supply: Investor Presentation
Common Company is making an attempt to just do 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 over 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 latest buy 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 yr.
Aggressive Benefits & Recession Efficiency
Common Company’s chief enterprise tends to see a dependable client, even when tobacco utilization has declined. Customers who do smoke are more likely to hunt down 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 effectively. The corporate’s earnings per-share earlier than, throughout and after the Nice Recession are listed under:
- 2006 adjusted earnings-per-share: $3.48
- 2007 adjusted earnings-per-share: $4.02 (15.5% enhance)
- 2008 adjusted earnings-per-share: $4.32 (7.5% enhance)
- 2009 adjusted earnings-per-share: $5.68 (31.5% enhance)
- 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% enhance)
Common Company’s earnings-per-share really improved greater than 41% from 2007 by 2009 throughout what was a really troublesome surroundings for a lot of corporations out there.
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.
Valuation & Anticipated Returns
Like all shares, Common Company whole returns will include dividend funds, earnings development and valuation modifications. Utilizing the annualized dividend of $3.12, shares of Common Company yield 6.3%.
The dividend payout ratio has climbed steadily in recent times. The payout ratio exceeded 70% in fiscal 2021. We don’t consider a dividend reduce is imminent, however do advise warning close to the dividend. On the very least, it’s possible dividend development shall be muted till earnings development accelerates.
Because of the firm’s reasonably weak efficiency for profitability over the past 10 years, we anticipate modest earnings development of simply 1.5% yearly over the following 5 years. Nonetheless, this can positively contribute to shareholder returns.
Lastly, growth of the valuation a number of will not be possible in our view. With a fiscal 2022 P/E of 10.9 in opposition to our honest worth P/E a number of of 11, the inventory is actually pretty valued.
Due to this fact, anticipated whole returns would include the next:
- 1.5% earnings development
- 6.3% dividend yield
- 0.2% P/E a number of growth
In whole, we count on annual returns of 8% over the following 5 years. This can be a respectable anticipated fee of return, however will not be excessive sufficient to earn a purchase suggestion proper now. The inventory has a sure degree of enchantment for revenue traders because of the very excessive yield, and regular annual dividend will increase.
Common Company is among the latest Dividend Kings. There are solely 32 corporations which have the required 50+ years of dividend development to achieve membership into the unique Dividend Kings.
Common can also be a excessive dividend inventory, with a yield above 6%.
That stated, traders shouldn’t buy shares of an organization merely due to the dividend. Whereas Common Company provides a excessive yield, it additionally has had rising earnings prior to now decade, which in flip has prompted the dividend development fee to say no as effectively.
The corporate’s dividend development has not been accompanied by earnings development, which has resulted in the next dividend payout ratio.
Common Company receives a maintain suggestion from Certain Dividend.
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