Dividend Aristocrats In Focus: Roper Applied sciences

Up to date on February twentieth, 2025 by Felix Martinez

Roper Applied sciences (ROP) has elevated its dividend payout for 32 consecutive years, making it one of many Dividend Aristocrats.

The Dividend Aristocrats are a choose group of 69 shares within the S&P 500 which have had 25+ years of consecutive dividend will increase. We consider they’re among the many finest long-term investments within the inventory market.

You’ll be able to obtain a full checklist of all Dividend Aristocrats (together with necessary monetary metrics that matter) by clicking on the hyperlink under:

Disclaimer: Positive Dividend shouldn’t be affiliated with S&P International in any manner. S&P International owns and maintains The Dividend Aristocrats Index. The knowledge on this article and downloadable spreadsheet relies 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 traders higher perceive this ETF and the index upon which it’s based mostly. Not one of the data on this article or spreadsheet is official information from S&P International. Seek the advice of S&P International for official data.

To grow to be a Dividend Aristocrat, an organization wants a robust enterprise mannequin, sturdy aggressive benefits, and the power to resist world recessions.

The Dividend Aristocrats are high-quality dividend progress shares. Much more interesting is Roper’s excessive dividend progress price. The newest improve was a ten% elevate.

Even among the many Dividend Aristocrats, dividend hikes of 10% are uncommon, which makes Roper’s dividend will increase during the last decade very spectacular. This text will focus on Roper’s enterprise, progress potential, and valuation.

Enterprise Overview

Roper designs and develops software program, together with each software-as-a-service and licensed expertise, and engineered merchandise and options. Roper has a various portfolio of services and products, which it gives to a large number of sectors, together with healthcare, transportation, meals, power, water, and training.

Roper focuses on three major enterprise segments:

• Software Software program
• Community Software program
• Know-how Enabled Merchandise

Supply: Investor Presentation

The Software Software program enterprise contains Aderant, CBORD, CliniSys, Knowledge Improvements, Deltek, Frontline, IntelliTrans, PowerPlan, Strata, and Vertafore as its major merchandise.

The Community Software program enterprise contains its major merchandise: ConstructConnect, DAT, Foundry, iPipeline, iTradeNetwork, Loadlink Applied sciences, MHA, SHP, and SoftWriters.

Lastly, the Know-how Enabled Merchandise section contains CIVCO Medical Options, FMI, Inovonics, IPA, Neptune, Northern Digital, rf IDEAS, and Verathon as its major merchandise.

Roper has broadly benefited from the regular growth of the U.S. financial system over the previous decade. We consider the corporate can preserve a constructive progress trajectory for a few years going ahead.

Progress Prospects

Roper is uniquely positioned to generate sturdy progress throughout its enterprise, even when the broader U.S. financial system faces challenges equivalent to inflation and geopolitical threat.

On January thirtieth, 2024, Roper reported sturdy monetary outcomes, with This autumn income growing 16% to $1.88 billion and full-year income rising 14% to $7.04 billion. Progress was pushed by natural growth and strategic acquisitions. Working money stream reached $2.39 billion, a 16% improve, whereas GAAP web earnings grew 13% to $1.55 billion. Adjusted DEPS rose 10% to $18.31, reflecting continued profitability and effectivity.

Supply: Investor Presentation

Aggressive Benefits & Recession Efficiency

Over the previous a number of years, Roper pursued an asset-light enterprise mannequin, with a particular concentrate on software program and engineered services and products. The corporate adopted this technique to broaden margins, by lowering capital expenditure wants, whereas additionally producing recurring income.

This has resulted in a lot stronger money conversion over time and is more likely to additional improve its money conversion ratio transferring ahead.

These elements give Roper super aggressive benefits. Its excessive margins and operational effectivity present it with ample money stream, which may be invested to remain forward of the competitors.

One other aggressive benefit that Roper has is that it’s extremely diversified throughout the expertise sector. It owns ~27 impartial companies with management positions in area of interest markets. Moreover, these finish markets are fairly diversified and supply sturdy recurring income and buyer retention.

Buyers must also observe that previously, Roper was a cyclical enterprise. It had the capability for very sturdy progress when the financial system was increasing but additionally struggled throughout recessions. Earnings-per-share throughout the Nice Recession are proven under:

• 2007 earnings-per-share of $2.68
• 2008 earnings-per-share of $3.06 (15% improve)
• 2009 earnings-per-share of $2.58 (16% decline)
• 2010 earnings-per-share of $3.34 (29% improve)

As you may see, Roper was not a extremely recession-resistant firm. Earnings-per-share declined 16% in 2009. If the financial system had been to enter a recession within the years forward, Roper might see earnings decline.

Roper additionally has an incredible dividend progress report, numbering 32 years of consecutive dividend will increase. Over the previous decade, DPS has grown yearly by a median of 14.1%.

We retain our DPS progress projection to 10%, which aligns with Roper’s newest improve and is definitely supported by the underlying web earnings. We count on Roper to develop earnings-per-share at a price of 10% yearly by means of 2030.

Valuation & Anticipated Returns

Roper is a high-quality firm with sturdy progress prospects, because of the excessive demand for its expertise. Subsequently, it shouldn’t be stunning that the inventory holds a premium valuation, as shares at the moment commerce for a price-to-earnings ratio of 29.2. Its P/E a number of is barely above its common valuation over the previous 10 years.

Since rates of interest have risen considerably over the previous 12 months, we’ve a goal price-to-earnings ratio of 26. If shares had been to revert to this goal valuation inside 5 years, annual returns can be lowered by 2.5%. Potential overvaluation is a threat that traders ought to think about earlier than shopping for the inventory.

Nevertheless, this will likely be offset by earnings-per-share progress (anticipated at 10% per 12 months) plus the 0.6% dividend yield, leading to whole anticipated returns of 8.1% per 12 months. It is a passable projected price of return for a robust enterprise.

Last Ideas

Roper has a high-quality enterprise mannequin, and 10% annual earnings-per-share progress shouldn’t be an unreasonable assumption transferring ahead.

The inventory can also be a Dividend Aristocrat, and due to the corporate’s excessive earnings progress price, 10%+ annual dividend will increase are attainable.

Roper matches the invoice of an important firm, however the inventory seems to be overvalued. Whereas the inventory might nonetheless generate strong returns for shareholders, it’s not at the moment a purchase because it doesn’t exceed our 10% annual return threshold. Roper inventory is a maintain.

Moreover, the next Positive Dividend databases include essentially the most dependable dividend growers in our funding universe:

If you happen to’re in search of shares with distinctive dividend traits, think about the next Positive Dividend databases:

The main 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: