Up to date on March twenty first, 2025 by Bob Ciura
Air Merchandise & Chemical substances (APD) is probably not essentially the most well-known firm. It’s primarily a business-to-business producer and distributor of business gases.
Nonetheless, Air Merchandise & Chemical substances 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 imagine the Dividend Aristocrats are among the many finest dividend progress shares to purchase for the long term.
With that in thoughts, we created a listing of all 69 Dividend Aristocrats, together with essential metrics like price-to-earnings and dividend yields.
You’ll be able to obtain a duplicate of our Dividend Aristocrats listing 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 is predicated on Positive Dividend’s personal overview, 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 based mostly. 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 substances’ dividend historical past – 43 years of consecutive dividend will increase – signifies that the corporate is a mannequin of consistency.
The corporate has reinvented itself lately. A derivative and a separate vital divestiture had been applied with the objective of streamlining the corporate’s enterprise mannequin and specializing in its core industrial fuel operations.
Air Merchandise & Chemical substances seems poised to proceed elevating its dividend for a few years to return.
Enterprise Overview
Air Merchandise & Chemical substances is likely one of the largest producers and distributors of atmospheric and course of gasses on the planet. Its clients embody different companies within the industrial, expertise, power, and supplies sectors.
Air Merchandise & Chemical substances was based in 1940 and has a present market capitalization of ~$65 billion.
It additionally has a big 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 substances reported monetary outcomes for the primary quarter of fiscal 2025 in February. Income of $2.93 billion throughout 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 progress in comparison with the earlier yr’s quarter.
Air Merchandise & Chemical substances was in a position to generate earnings-per-share of $2.86 throughout the first quarter, which was up 1% in comparison with the earlier yr’s interval. EBITDA was up 1% as properly throughout the interval.
Following a report yr in 2024, Air Merchandise & Chemical substances is guiding for one more report revenue in fiscal 2025, with earnings-per-share seen at $12.70 to $13.00. The steerage implies an earnings-per-share progress fee of round 3% this yr.
Progress Prospects
The streamlining initiatives undertaken by Air Merchandise & Chemical substances up to now a number of years have led to vital profitability enhancements for the commercial fuel big. The corporate’s EBITDA margin pattern over the past a number of years might be seen under:
Air Merchandise & Chemical substances has expanded its adjusted EBITDA margin by ~1400 foundation factors because the second quarter of 2014 – a big enchancment, which has mixed with rising adjusted EBITDA to drive increased earnings-per-share and dividends.
It is going to additionally develop on account of worldwide growth, as the corporate’s Gases Asia enterprise has delivered the best progress fee within the current previous, though its American enterprise stays the most important section.
Air Merchandise & Chemical substances has various progress tasks both just lately accomplished or scheduled to be accomplished within the coming months.
Supply: Investor Presentation
Investments in NEOM will drive its inexperienced power publicity and increase its presence in Saudi Arabia, whereas Air Merchandise & Chemical substances can also be is increasing its hydrogen footprint in a number of markets, investing closely lately and for the foreseeable future on this business with the intention to profit from the anticipated market progress within the coming years.
These investments, coupled with margin progress initiatives, ought to result in significant earnings progress for the corporate over the approaching years. We anticipate 6% annualized EPS progress over the subsequent 5 years.
Aggressive Benefits & Recession Efficiency
Air Merchandise & Chemical substances has various aggressive benefits. The primary and first benefit the corporate has is its dimension and market share.
Furthermore, the commercial fuel distribution enterprise advantages from excessive switching prices. These prices could not essentially be monetary – as an alternative, clients are unlikely to change as soon as their fuel wants are being met by a specific provider as a result of it could be troublesome to discover a competitor that gives an identical companies in a specific geographic area.
To that finish, Air Merchandise & Chemical substances’ dimension additionally advantages the corporate.
The corporate’s current 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 substances has a observe report of performing fairly properly throughout previous recessions.
Take into account the corporate’s efficiency throughout the 2007-2009 monetary disaster for proof of this:
- 2007 adjusted earnings-per-share: $4.40
- 2008 adjusted earnings-per-share: $4.97 (13% improve)
- 2009 adjusted earnings-per-share: $4.06 (18.3% decline)
- 2010 adjusted earnings-per-share: $5.02 (23.6% improve)
Air Merchandise & Chemical substances skilled an 18.3% decline in adjusted earnings-per-share in 2009 throughout 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 yr for the worldwide financial system because of the coronavirus pandemic.
The U.S. financial system entered a recession because of the pandemic, however Air Merchandise & Chemical substances skilled solely a gentle dip in earnings, which allowed it to proceed elevating its dividend.
Valuation & Anticipated Whole Returns
With a 6% anticipated EPS progress fee, along with a 2.4% dividend yield, one may anticipate excessive single-digit annual returns from the safety.
Nonetheless, it’s crucial to contemplate how valuation can impression future returns.
Utilizing $12.85 because the anticipated fiscal 2025 adjusted earnings-per-share, and a share worth of $291, the safety is at the moment buying and selling fingers at 22.6 instances anticipated earnings.
For context, the inventory has traded at a mean earnings a number of nearer to 19 over the past 10 years.
We imagine that 20 instances earnings is a good valuation estimate for Air Merchandise & Chemical substances, that means shares are barely overvalued. Imply reversion to a price-to-earnings ratio of 20 may decrease annualized returns by -2.4% over a 5-year time horizon.
As such, we anticipate complete annual returns to include the next:
- 6% earnings-per-share progress
- 2.4% dividend yield
- -2.4% P/E a number of compression
We anticipate complete annual returns of 6.0% per yr by means of 2029.
Ultimate Ideas
Air Merchandise & Chemical substances is a powerful dividend progress inventory, having raised its dividend every year for the previous 43 years.
The corporate has de-risked its enterprise mannequin and that enterprise transformation permits it to concentrate on its core enterprise of business gases.
Furthermore, it has a big slate of latest tasks to assist keep on observe for progress 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 fee the inventory as a maintain proper now.
If you’re taken with discovering extra high-quality dividend progress shares appropriate for long-term funding, the next Positive Dividend databases can be helpful:
The foremost home inventory market indices are one other stable useful resource for locating funding concepts. Positive Dividend compiles the next inventory market databases and updates them month-to-month:
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