Dover Corporation (DOV) recently announced an 11% (3.5 cents) hike in its quarterly dividend to 35 cents from the prior payout of 31.5 cents. This marks the 57th consecutive year of dividend hike by Dover and places the company in the fourth position with respect to highest number of consecutive annual dividend increases among all listed companies, according to Mergent’s Dividend Achievers.
The increased dividend will be paid on September 15, 2012, to stockholders of record as of August 31, 2011. Previously, Dover had increased its quarterly dividend by 14.5% to 27.5 cents in August 2011.
The company’s dividend yield of 2.61% is higher than the industry yield of 2.09%. Dover’s 5-year dividend growth rate of 10.69 is also way ahead of the industry average of 4.80. However, its payout ratio of 27.58% is less than the industry average of 44.33%.
With net margin of 10.07% almost close to industry average of 10.61%, Dover can further improve its payout ratio. Dover also outscores its competitors like Cooper Industries plc (:CBE) and Ingersoll-Rand Plc (IR) in terms of dividend yield, dividend growth and payout ratio.
Dover recently reported second-quarter 2012 earnings of $1.15 per share, ahead of the Zacks Consensus Estimate of $1.14. Results inched up 1% from the prior-year quarter earnings of $1.14 per share. Total revenue was $2.157 billion, improving 8% year over year but missing the Zacks Consensus Estimate of $2.186 billion.
For fiscal 2012, Dover expects revenue growth in the range of 8%-10%, down from the previous guidance of 10%-14%. Organic revenue growth will contribute 3%-5% while acquisitions will add 5% to the revenue growth. It expects earnings to lie in the band of $4.70-$4.85. The Zacks Consensus Estimate for EPS is at $4.73 per share and for revenue at $8.6 billion, an 8.3% annual growth.
Dover has strong liquidity to support the dividend increase. The company ended the second quarter with cash and cash equivalents of $786 million and generated $412 million in cash from operations in the first half of fiscal 2012.
Dover’s expansion has been mainly driven by acquisitions and its acquisition pipeline is ever active. Production Control Services, Inc. will complement the Norris Production Solutions, an operating unit within Dover's Energy segment. The acquisition will help Dover to pursue its strategy of becoming the market leader in the field of artificial lift. Further, it will be able to foray into the artificial lift market with a wider and diversified range of products.
Dover has access to the volatile semiconductor and electronics end-markets through its Printing and Identification segment. With regards to development, we do not expect anything noteworthy in the semiconductor sector in 2012 and thus remain cautious regarding the outlook for Printing and Identification.
We maintain our long-term Neutral recommendation on Dover. Dover retains a short-term Zacks #3 Rank (Hold).
New York-based Dover is an industrial conglomerate producing a wide range of specialized industrial products and manufacturing equipment.
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