Dover: This Dividend King Is Firing On All Cylinders

DOV Energy

While the energy business of Dover is enjoying an impressive recovery, the traumatic experience from the recent downturn led the management to decide to spin off this segment. In this way, Dover will greatly reduce its cyclical nature while the spin-off company will be an ideal holding for those who seek direct exposure to the upstream energy business. Moreover, thanks to the strong rebound of this segment, the timing of the spin-off could not be better. As per the latest guidance of the management, the spin-off is expected to materialize in May.

Growth Prospects

Apart from the energy segment, the other segments grew at remarkable rates last year. The segment of engineered systems, which is the largest segment, enjoyed 6% organic revenue growth last year. Within this segment, the digital textile printing is growing at a fast pace and has plenty of growth ahead.

More precisely, the management believes that it can grow the penetration of this business from its current 3%-5% rate to 30% over the next decade. This is certainly exciting.

Apart from the energy segment and the segment of engineered systems, the management expects meaningful growth from the other two segment as well, as shown in the table below:

DOV growth

Overall, the management expects to achieve 19% growth in the earnings per share [EPS] this year, from $4.89 to $5.73-$5.93. Significant growth is expected both in the domestic market and in China. These growth prospects are definitely sufficient to satisfy even the most demanding shareholders.

Competitive Advantages & Recession Performance

At first sight, Dover is a manufacturer of industrial equipment and hence there seems to be little potential for differentiation in its business. As a result, it would be natural to assume that the company does not have meaningful competitive advantages. However, the exceptional growth record of the company indicates that it actually has some competitive advantages.

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