Dover: This Dividend King Is Firing On All Cylinders

Dividend kings are stocks that have grown their dividends for at least 50 consecutive years. You can see the full list of all 25 Dividend Kings here.

Therefore, as the earnings of cyclical companies tend to collapse during economic downturns, it is really rare to see a cyclical stock qualify in this group. Nevertheless, Dover Corp. (DOV) is a bright exception to this rule, as it has raised its dividend for 62 consecutive years. Even better, the company is firing on all cylinders right now.

Business Overview

Dover is a diversified global industrial manufacturer with annual revenues of about $8 B. The four segments and their contribution to the total revenues are shown below:

  • Engineered Systems: 33%
  • Fluids: 29%
  • Refrigeration & Food Equipment: 20%
  • Energy: 18%

Dover was severely affected by the downturn of the oil market in 2016. As the price of oil collapsed, most oil producers drastically curtailed their activities. Consequently, the contribution of the energy segment to the total revenues of the company plunged from 26% in 2014 to 16% in 2016. The trend was much more dramatic in the contribution of this segment to the total earnings, which collapsed from 34% in 2014 to 6% in 2016.

Fortunately for Dover, the price of oil has enjoyed a strong rebound since last summer thanks to the production cuts of OPEC and Russia. As a result, the U.S. crude oil production grew 1.2 M barrels/day last year and reached its highest level in history, surpassing the hallmark of 10 M barrels/day. Even better, the Energy Information Administration projects that the output will continue to grow in 2018 and 2019, to an average level of 10.7 M and 11.3 M barrels/day, respectively.

Therefore, the energy segment of Dover is experiencing tremendous growth, with ample room for further growth. To be sure, during the last quarter, this segment posted organic revenue growth of 23% and an 18% increase in its bookings.

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