Dividend Kings Overview and Valuation Series – Dover Corporation (DOV)

Welcome to this series where I will be reviewing all the Dividend Kings and providing an overview and valuation calculation on the companies. Dividend Kings are a rare breed of Dividend Growth Companies. These companies have managed to raise their dividend for 50 or more years consecutively. Through all types of market swings, economic trouble, wars, recessions, these companies have seen it all and continue to reward shareholders with rising dividend income.

This week’s entry will focus on:

Dover Corporation (DOV)

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Overview

Dover is a diversified global manufacturer that delivers innovative equipment and components, consumable supplies, aftermarket parts, software and digital solutions and support services.

The company operates in 5 segments:

• The Engineered Products segment delivers industry-leading equipment, components and software serving the vehicle aftermarket, waste handling, industrial automation and aerospace & defense end markets. 
• Clean Energy & Fueling provides a comprehensive portfolio of safety and efficiency solutions for the convenience retail, fueling and clean energy, cryogenic gas and vehicle wash markets.
• Imaging and Identification provides leading design and manufacture of equipment, consumables and software, in addition to providing support services for the marking & coding, product traceability and authentication and digital textile printing markets.
• Pumps and Process Solutions supplies performance-critical components and solutions for the safe handling of fluids across the chemical, bioproduction, hygienic, energy and diversified industrial markets.
• The Climate & Sustainability Technologies develops and supplies innovative and energy-efficient equipment and systems serving the commercial refrigeration, heating & cooling and beverage packaging equipment markets.

It sells its products directly and through a network of distributors. The company was incorporated in 1947 and is headquartered in Downers Grove, Illinois.

(Source: Company Website)

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Metrics:

Dividend Amount: $2.00

Dividend Yield: 1.50%

5 Year Dividend CAGR: 9.17%

Dividend Payout Ratio: 26.01%

Years of Dividend Increases: 66 Years

EPS: $7.69

P/E: 14.22

Analyst 5 Year Earnings Growth Estimate: 12.95%

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Valuation:

Current Price: $133.06 (5/26/22)

DCF (10% RRR): $184.25

P/E Mean Reversion:$161.41

Dividend Yield Theory: $109.89

Average of the three: $151.85

Analyst 1 year Price Target: $174.73

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Commentary:

Dover Corporation (DOV) is a global collection of manufacturing businesses with annual combined revenue of almost $8 billion.  The company’s philosophy for growth is acquiring strong businesses with solid fundamentals and market leading positions.  

The company released their Q1 earnings in late April and as part of their earnings presentation provided Fiscal Year 2022 forecasts of 8-10% revenue growth, Free Cash Flow of 13-15% of Revenue, and GAAP Earnings of $8.45-$8.65.  

DOV has paid and raised their dividend for 66 years, with the current yield at 1.50% and their 5 year dividend CAGR is 9.17%.  This dividend CAGR is in line with their company’s projected earnings growth rate, and combined with their low current payout ratio, the dividend appears to be well covered.

The company’s revenue and net income have progressively gone up over the past 5 years, with a slight blip down in 2020.  The stock has grown 99.67% over the past 5 years, compared to the S&P’s return of 73.30%, handily beating the index.  The past year the stock is down a little more than 10% but the majority of that drop has been over the past 2 months, along with the overall market. The company has a Beta of 1.40.

DOV is a stable and growing company, with a long history of growth and paying a reliable dividend.  The current price has come down 26.73% this year and appears to be a decent value, showing it is currently undervalued based on two of the valuation methods shown above.  The dividend is low and the growth is slightly above average, but the stock does appear to be a good value at this time.

Disclosure:  I do not own shares of DOV.