Seeking High Quality Dividend Growth? Try Accenture

Accenture (ACN) is the type of high quality dividend growth stock I like to own in our Top 20 Dividend Stocks portfolio.

The company has raised its dividend every year since it began paying one in 2005, recording annual dividend growth greater than 20% during that time period.

Accenture’s dividend scores extremely high marks for safety and growth thanks to the company’s healthy payout ratios, excellent free cash flow generation, clean balance sheet, and proven durability.

Let’s take a closer look at Accenture as a potential investment opportunity for investors building a dividend portfolio.

Business Overview

Accenture is one of the largest professional services companies in the world and provides a range of end-to-end services and solutions in strategy, consulting, digital technology, and operations. Accenture develops and implements technology solutions to improve its clients’ productivity and efficiency.

The company was started in the 1950s and now serves more than 40 industries and delivers virtually every business function needed by its customers.

Accenture’s clients include 94 of the Fortune Global 100 and over 80% of the Fortune Global 500. Approximately 54% of Accenture’s revenue is generated from consulting with the remaining 46% from outsourcing activities.

By geography, North America is the company’s largest region and accounts for 47% of total revenue. Europe generates another 35% of revenue, and the remaining 17% are from growth markets such as Brazil.

By operating group, Accenture generates 25% of its sales from Products (consumer goods, retail, travel services, industrial, life sciences); 21% from Financial Services (banking, capital markets, insurance); 20% from Communications, Media & Tech; 18% from Health & Public Service; and 15% from Resources (chemicals, energy, utilities, natural resources).

Business Analysis

Accenture’s competitive advantages begin with its long operating history, wide range of services, and focus on developing its people.

The company has been in business for more than 60 years, which has given it the time needed to establish long-lasting customer relationships and build out its portfolio of skills and services.

The longer Accenture works with a client, the more ingrained it becomes in the client’s business processes and key strategic issues. As a result, switching costs are created that help with client retention.

For example, 97 of the firm’s top 100 clients have worked with Accenture for at least 10 years. The firm also owns one of the 50 most valuable brands in the world and is a trusted partner.

Few companies can match the breadth and reach of Accenture’s services, which is a requirement to serve large multinational clients. The company has offices in more than 50 countries around the world and is able to deliver end-to-end solutions virtually anywhere.

Accenture delivers its services through nearly 20 focused industry groups and consistently acquires smaller rivals to round out its services. The company has invested about $2.5 billion in nearly 40 acquisitions over its last three fiscal years to enhance its skills and gain scale in key growth areas such as digital.

As the pace of technological advancements accelerates, Accenture is becoming an even more important partner for its clients because it helps them be the digital disruptors rather than the disruptors.

From 3D printing, cloud computing, data analytics, and security to virtual reality and robotics, Accenture plays a leading role in helping its clients go more digital with their products and services.

Digital-related, cloud-related, and security-related services now represent close to 40% of Accenture’s revenue and are growing at a double-digit clip.

1 2 3 4
View single page >> |

Disclosure: At the time of this writing, the author was long ACN.

How did you like this article? Let us know so we can better customize your reading experience. Users' ratings are only visible to themselves.

Comments

Leave a comment to automatically be entered into our contest to win a free Echo Show.
Somesh Ramnani 3 years ago Contributor's comment

Safe to say Accenture is a safe investment for both clients and investors!

Thanks for the great read