Dividend Aristocrats In Focus: Ecolab – Sure Dividend

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 vital metrics like dividend yields and price-to-earnings ratios, by clicking on the hyperlink beneath:

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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 study the assorted elements behind Ecolab’s rise to prominence and our present score 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 this time, Ecolab is the trade 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 when it comes to 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 revenue margins improved, with natural margin reaching 17.4% attributable to greater 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 attributable to excessive inflation. We view these headwinds as short-term and anticipate 10% common annual progress of earnings per share over the following 5 years.

Supply: Investor Presentation

One of many firm’s most vital 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 nations. It generates annual gross sales of roughly $400 million.

Ecolab has confirmed profitable at integrating different acquisitions, so we stay constructive concerning the firm’s capacity to take action sooner or later. Acquisitions resembling 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 following 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 repute amongst its clients, and innovation. Ecolab serves greater than 1 million buyer areas unfold throughout greater than 170 nations. The corporate is just not afraid to spend important sources on analysis and improvement of latest services and products.

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 effectively 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 outstanding. Not solely did the corporate generate constructive earnings progress in annually of the recession, however it achieved double-digit earnings progress in three of these years.

Valuation & Anticipated Returns

Based mostly on the present buying and selling worth 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 now have a goal price-to-earnings ratio of 20. If shares of Ecolab had been to return to our goal valuation by 2030, this would scale back whole returns by 10.7% per yr.

The inventory is in peril of experiencing a contraction of the valuation a number of, which might negatively impression whole returns. Ecolab’s dividend is not going to doubtless signify a big portion of whole returns. It is because the present dividend yield is simply 0.9%. That is decrease than the common 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% via 2030. Valuation headwinds are prone to put on down a lot of the firm’s potential returns from its earnings and dividend progress prospects.

Whereas Ecolab is a gorgeous dividend progress inventory attributable to its excessive fee of dividend will increase, it’s not as interesting for revenue buyers or worth buyers.

Remaining Ideas

Ecolab is just not prone to be a gorgeous inventory for buyers solely in excessive ranges of revenue. It’s a very robust inventory for buyers all in favour of a recession-resistant enterprise and dividend progress.

Ecolab has a wonderful file of profitability and progress and is likely one of the few corporations with a dividend progress streak of not less than 25 years. That mentioned, as we speak won’t be a perfect time to amass shares within the firm as a result of lack of significant projected returns over the medium time period. Subsequently, we fee Ecolab’s shares as a Promote.

If you’re all in favour of discovering high-quality dividend progress shares appropriate for long-term funding, the next Positive Dividend databases will likely be helpful:

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