Dividend Aristocrats In Focus: Expeditors International Of Washington

Expeditors International of Washington Inc. (EXPD) may not be the best-known stock to most investors given that it services a logistics and transportation niche in global commerce. However, the company has a terrific track record creating value for shareholders, both via appreciation in the share price and by increasing its dividend payment.

In fact, 2019 marked the 25th consecutive year Expeditors increased its payout, making it a new member of the prestigious Dividend Aristocrats, a group of S&P 500 stocks with at least 25 consecutive years of dividend increases.

Expeditors has proven over time to be a business with strong growth prospects, although that growth hasn’t been linear by any means. The cyclical nature of the shipping business creates inherent volatility, but over time, Expeditors has delivered growth.

Expeditors stock looks fairly valued today. The stock pays a low-single-digit dividend and should produce mid-single-digit revenue growth annually for the foreseeable future. Overall, in light of the stock’s very long dividend increase history and steady growth, we see the stock as attractive for dividend growth investors.

Business Overview

Expeditors is a global logistics company that offers services including consolidation and forwarding of air and ocean freight, customs brokerage, vendor consolidation, cargo insurance, time-sensitive delivery options, order management, warehousing and distribution, and other customized logistics solutions. In short, Expeditors offers companies global commerce logistics solutions in all shapes and sizes.

Expeditors was founded in 1979 in Seattle and since that time, it has grown from a single office into more than 300 locations across six continents, spanning more than 100 countries and employing more than 17,000 people. Expeditors generates in excess of $8 billion of gross annual revenue, with air freight revenue being the largest single source. The company is fairly well diversified with its revenue streams, as we can see below:

(Click on image to enlarge)

EXPD Overview

Source: 2018 Annual Report, page 14

Expeditors has seen its shares move steadily higher in recent years and while the stock is somewhat off of its recent and all-time high, the company’s market capitalization is still near $13 billion.

Expeditors’ most recent earnings report was delivered in November of 2019 for the fiscal third quarter. The company reported some signs of weakness, including deviations from the trends of the first half of the year. Revenue was up just 1% during the quarter year-over-year as ocean volumes fell 2%, but airfreight volumes declined 9%. Volumes worsened in the latter half of the quarter as tariff and general global trade fears have caused some customers to pull back shipments.

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