Stepan Company (SCL) is an unlikely Dividend King. It is a chemical company and a small one at that with a market capitalization of only about $2.8 billion. But it keeps showing up on my Dividend Power ranking over the past few months in the top five. The stock has solid trailing averages for earnings growth and dividend growth. In addition, the safety metrics are decent with low debt-to-equity, low payout ratio, and a low beta. The balance sheet has improved over the past decade to a net cash position. Granted, the stock is not undervalued based on historical price-to-earnings ratio and the dividend yield is low at roughly 1%. Stepan is trading near its 52-week high now. The COVID-19 pandemic has created a high demand for consumer products, a major market for Stepan, but this has been somewhat offset by lower construction market sales. I am currently neutral on this stock.

Stepan Company (SCL): An Unlikely Dividend King

Overview of Stepan Company – Unlikely Dividend King

Stepan Company was founded in 1932. Today, Stepan is a global producer of specialty chemicals with 18 manufacturing sites in 11 countries. The company operates in three business segments: Surfactants, Polymers, and Specialty Products. The largest segment is Surfactants at 68% of total revenue, Polymers has 28% of revenue, and Specialty Products generates 4% of revenue. Surfactants sells chemicals for consumer products (laundry care, shampoo, conditioners, dishwash, body wash, surface care, and cleaning & disinfection), agriculture, and oilfields. Polymers sell polyester polyols used in rigid foam insulation, specialty polyols used in adhesives and coatings, and phthalic anhydride used in insulation and paint and coatings. Specialty Products focuses on dietary supplements, food & beverages, cosmetics, and pharmaceuticals. The current CEO is the grandson of the founder. Insiders own about 6.2% of the common stock. Total revenue was $1,859 million in 2019.

Stepan Revenue Growth and Margins

Stepan has been growing revenue both organically and through M&A over the past decade. Revenue was $1,431 million 10-years ago and was $1,859 million in 2019…

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