Dividend Aristocrats In Focus: Ecolab

Up to date on March fifth, 2025 by Felix Martinez

There are simply 69 shares on the listing of Dividend Aristocrats, members of the S&P 500 Index which have raised their dividends for 25+ consecutive years.

We view the Dividend Aristocrats as among the many finest dividend shares to purchase and maintain.

You may obtain a free listing of all 69 Dividend Aristocrats, together with necessary metrics like dividend yields and price-to-earnings ratios, by clicking on the hyperlink under:

Disclaimer: Certain Dividend just isn’t affiliated with S&P International in any method. S&P International owns and maintains The Dividend Aristocrats Index. The data on this article and downloadable spreadsheet relies on Certain Dividend’s personal assessment, abstract, and evaluation of the S&P 500 Dividend Aristocrats ETF (NOBL) and different sources, and is supposed to assist particular person traders 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 information from S&P International. Seek the advice of S&P International for official info.

Ecolab (ECL) is an instance of an organization that possesses all of those qualities. Ecolab has an extended historical past of progress, and has elevated its dividend for over 33 years.

This text will look at the assorted elements behind Ecolab’s rise to prominence and our present ranking of Ecolab inventory.

Enterprise Overview

Ecolab was created in 1923 when its founder Merritt J. Osborn invented a brand new cleansing product known as “Absorbit”. This product cleaned carpets with out the necessity for companies to close down operations to conduct carpet cleansing. Osborn created an organization revolving across the product, known as Economics Laboratory, or Ecolab.

At present, Ecolab is the business chief, producing roughly $16 billion in annual gross sales.

Ecolab operates three main enterprise segments: International Industrial, International Institutional, and International Power, every roughly equal in dimension. The enterprise is diversified by way of working segments and geography. About 55% of the corporate’s gross sales happen outdoors North America.

In mid-February, Ecolab reported (2/11/25) monetary outcomes for the fourth quarter of fiscal 2024. Ecolab delivered a robust fourth quarter and file 2024 efficiency, with reported diluted EPS up 18% to $1.66 and adjusted EPS rising 17% to $1.81. Gross sales grew 2% to $4.0 billion, with natural gross sales up 4%, led by Industrial and Healthcare & Life Sciences. Working earnings margins improved, with natural margin reaching 17.4% on account of increased gross sales and strategic investments.

Supply: Investor Presentation

Progress Prospects

Ecolab grew its earnings per share by 10.9% per yr from 2011 to 2019. Nonetheless, it declined in 2020 as a result of pandemic and in 2022 on account of excessive inflation. We view these headwinds as short-term and anticipate 10% common annual progress of earnings per share over the subsequent 5 years.

Supply: Investor Presentation

One of many firm’s most necessary progress catalysts is acquisitions. In late 2021, Ecolab acquired Purolite for $3.7 billion in money. Purolite sells high-end ion change resins for the separation of options in over 30 international locations. It generates annual gross sales of roughly $400 million.

Ecolab has confirmed profitable at integrating different acquisitions, so we stay optimistic in regards to the firm’s capacity to take action sooner or later. Acquisitions similar to these and natural funding have fueled regular earnings progress for many years.

We really feel that the corporate is well-positioned to proceed rising. Over the subsequent 5 years, we anticipate ECL to develop earnings per share by 10% per yr.

Aggressive Benefits & Recession Efficiency

Ecolab’s many aggressive benefits embrace scale, a robust fame amongst its prospects, and innovation. Ecolab serves greater than 1 million buyer places unfold throughout greater than 170 international locations. The corporate just isn’t afraid to spend important assets on analysis and growth of recent services.

Administration refers to R&D spending as its “innovation pipeline.” Ecolab typically spends greater than $1 billion on this pipeline. Due largely to this R&D spending, the corporate has greater than 9,000 patents.

Ecolab’s R&D investments and mental property assist the corporate keep forward of the competitors. These investments have created an extremely robust enterprise that may maintain up very properly even throughout financial downturns.

For clear proof of Ecolab’s aggressive benefits, look no additional than its efficiency throughout the Nice Recession:

• 2006 earnings-per-share of $1.43
• 2007 earnings-per-share of $1.66 (16% improve)
• 2008 earnings-per-share of $1.86 (12% improve)
• 2009 earnings-per-share of $1.99 (7% improve)
• 2010 earnings-per-share of $2.23 (12% improve)

Ecolab’s progress throughout the Nice Recession was actually exceptional. Not solely did the corporate generate optimistic earnings progress in annually of the recession, nevertheless it achieved double-digit earnings progress in three of these years.

Valuation & Anticipated Returns

Primarily based on the present buying and selling value of $269 and anticipated earnings-per-share of $7.55, Ecolab has a price-to-earnings ratio of 35.6. The inventory has a ten-year common price-to-earnings ratio of 20. We’ve a goal price-to-earnings ratio of 20. If shares of Ecolab have been to return to our goal valuation by 2030, this would scale back complete returns by 10.7% per yr.

The inventory is in peril of experiencing a contraction of the valuation a number of, which might negatively affect complete returns. Ecolab’s dividend is not going to doubtless symbolize a big portion of complete returns. It is because the present dividend yield is simply 0.9%. That is decrease than the typical dividend yield of the S&P 500 Index.

Ecolab’s dividend progress streak now totals 33 consecutive years.

A breakdown of potential five-year returns is as follows:

• 10.0% earnings progress
• 0.9% dividend yield
• 10.7% valuation reversion

We anticipate Ecolab to supply a complete annual return of 0.2% by way of 2030. Valuation headwinds are more likely to put on down many of the firm’s potential returns from its earnings and dividend progress prospects.

Whereas Ecolab is a gorgeous dividend progress inventory on account of its excessive price of dividend will increase, it isn’t as interesting for earnings traders or worth traders.

Closing Ideas

Ecolab just isn’t more likely to be a gorgeous inventory for traders solely in excessive ranges of earnings. It’s a very robust inventory for traders inquisitive about a recession-resistant enterprise and dividend progress.

Ecolab has a superb file of profitability and progress and is likely one of the few corporations with a dividend progress streak of at the least 25 years. That stated, as we speak won’t be a really perfect time to accumulate shares within the firm as a result of lack of significant projected returns over the medium time period. Due to this fact, we price Ecolab’s shares as a Promote.

If you’re inquisitive about discovering high-quality dividend progress shares appropriate for long-term funding, the next Certain Dividend databases shall be helpful:

The foremost home inventory market indices are one other strong useful resource for locating funding concepts. Certain Dividend compiles the next inventory market databases and updates them month-to-month: