Up to date on March twenty first, 2025 by Bob Ciura
Air Merchandise & Chemical compounds (APD) is probably not essentially the most well-known firm. It’s primarily a business-to-business producer and distributor of commercial gases.
Nonetheless, Air Merchandise & Chemical compounds is an elite dividend inventory as a member of the Dividend Aristocrats, a gaggle of dependable dividend shares with 25+ years of consecutive dividend will increase.
We consider the Dividend Aristocrats are among the many finest dividend development shares to purchase for the long term.
With that in thoughts, we created an inventory of all 69 Dividend Aristocrats, together with vital metrics like price-to-earnings and dividend yields.
You’ll be able to obtain a duplicate of our Dividend Aristocrats listing by clicking on the hyperlink beneath:
Disclaimer: Certain Dividend will not be affiliated with S&P World in any approach. S&P World owns and maintains The Dividend Aristocrats Index. The knowledge on this article and downloadable spreadsheet is predicated on Certain Dividend’s personal assessment, abstract, and evaluation of the S&P 500 Dividend Aristocrats ETF (NOBL) and different sources, and is supposed to assist particular person traders higher perceive this ETF and the index upon which it’s based mostly. Not one of the info on this article or spreadsheet is official knowledge from S&P World. Seek the advice of S&P World for official info.
Air Merchandise & Chemical compounds’ dividend historical past – 43 years of consecutive dividend will increase – signifies that the corporate is a mannequin of consistency.
The corporate has reinvented itself lately. A by-product and a separate vital divestiture had been applied with the objective of streamlining the corporate’s enterprise mannequin and specializing in its core industrial fuel operations.
Air Merchandise & Chemical compounds seems poised to proceed elevating its dividend for a few years to return.
Enterprise Overview
Air Merchandise & Chemical compounds is among the largest producers and distributors of atmospheric and course of gasses on the planet. Its prospects embody different companies within the industrial, know-how, vitality, and supplies sectors.
Air Merchandise & Chemical compounds was based in 1940 and has a present market capitalization of ~$65 billion.
It additionally has a big worldwide presence. Roughly 40% of the corporate’s annual gross sales are generated within the U.S. and Canada, with the rest unfold throughout Latin America, Europe, and Asia.
Air Merchandise & Chemical compounds reported monetary outcomes for the primary quarter of fiscal 2025 in February. Income of $2.93 billion through the quarter, declined 2.3% year-over-year, lacking the analyst consensus estimate by $10 million.
Supply: Investor Presentation
The corporate’s prices declined much more than revenues, which nonetheless allowed for some earnings development in comparison with the earlier yr’s quarter.
Air Merchandise & Chemical compounds was in a position to generate earnings-per-share of $2.86 through the first quarter, which was up 1% in comparison with the earlier yr’s interval. EBITDA was up 1% as nicely through the interval.
Following a report yr in 2024, Air Merchandise & Chemical compounds is guiding for an additional report revenue in fiscal 2025, with earnings-per-share seen at $12.70 to $13.00. The steering implies an earnings-per-share development charge of round 3% this yr.
Progress Prospects
The streamlining initiatives undertaken by Air Merchandise & Chemical compounds prior to now a number of years have led to vital profitability enhancements for the commercial fuel large. The corporate’s EBITDA margin pattern over the past a number of years will be seen beneath:
Air Merchandise & Chemical compounds has expanded its adjusted EBITDA margin by ~1400 foundation factors for the reason that second quarter of 2014 – a big enchancment, which has mixed with rising adjusted EBITDA to drive increased earnings-per-share and dividends.
It would additionally develop on account of worldwide growth, as the corporate’s Gases Asia enterprise has delivered the very best development charge within the latest previous, though its American enterprise stays the biggest phase.
Air Merchandise & Chemical compounds has various development tasks both just lately accomplished or scheduled to be accomplished within the coming months.
Supply: Investor Presentation
Investments in NEOM will drive its inexperienced vitality publicity and broaden its presence in Saudi Arabia, whereas Air Merchandise & Chemical compounds can also be is increasing its hydrogen footprint in a number of markets, investing closely lately and for the foreseeable future on this business in an effort to profit from the anticipated market development within the coming years.
These investments, coupled with margin development initiatives, ought to result in significant earnings development for the corporate over the approaching years. We anticipate 6% annualized EPS development over the following 5 years.
Aggressive Benefits & Recession Efficiency
Air Merchandise & Chemical compounds has various aggressive benefits. The primary and first benefit the corporate has is its dimension and market share.
Furthermore, the commercial fuel distribution enterprise advantages from excessive switching prices. These prices might not essentially be monetary – as a substitute, prospects are unlikely to modify as soon as their fuel wants are being met by a specific provider as a result of it will be troublesome to discover a competitor that gives equivalent companies in a specific geographic area.
To that finish, Air Merchandise & Chemical compounds’ dimension additionally advantages the corporate.
The corporate’s latest divestitures and asset gross sales have given it an infusion of money, bolstering its company funds in a approach that ought to assist it endure any upcoming financial downturns. Furthermore, Air Merchandise & Chemical compounds has a monitor report of performing moderately nicely throughout previous recessions.
Think about the corporate’s efficiency through the 2007-2009 monetary disaster for proof of this:
2007 adjusted earnings-per-share: $4.40
2008 adjusted earnings-per-share: $4.97 (13% improve)
2009 adjusted earnings-per-share: $4.06 (18.3% decline)
2010 adjusted earnings-per-share: $5.02 (23.6% improve)
Air Merchandise & Chemical compounds skilled an 18.3% decline in adjusted earnings-per-share in 2009 through the monetary disaster, however the firm’s backside line surged to a brand new excessive by 2010.
The corporate additionally remained extremely worthwhile in 2020, a troublesome yr for the worldwide economic system because of the coronavirus pandemic.
The U.S. economic system entered a recession because of the pandemic, however Air Merchandise & Chemical compounds skilled solely a gentle dip in earnings, which allowed it to proceed elevating its dividend.
Valuation & Anticipated Whole Returns
With a 6% anticipated EPS development charge, along with a 2.4% dividend yield, one would possibly anticipate excessive single-digit annual returns from the safety.
Nonetheless, it’s crucial to think about how valuation can impression future returns.
Utilizing $12.85 because the anticipated fiscal 2025 adjusted earnings-per-share, and a share value of $291, the safety is at present buying and selling arms at 22.6 occasions anticipated earnings.
For context, the inventory has traded at a median earnings a number of nearer to 19 over the past 10 years.
We consider that 20 occasions earnings is a good valuation estimate for Air Merchandise & Chemical compounds, that means shares are barely overvalued. Imply reversion to a price-to-earnings ratio of 20 may decrease annualized returns by -2.4% over a 5-year time horizon.
As such, we anticipate whole annual returns to encompass the next:
6% earnings-per-share development
2.4% dividend yield
-2.4% P/E a number of compression
We anticipate whole annual returns of 6.0% per yr by way of 2029.
Remaining Ideas
Air Merchandise & Chemical compounds is a powerful dividend development inventory, having raised its dividend every year for the previous 43 years.
The corporate has de-risked its enterprise mannequin and that enterprise transformation permits it to concentrate on its core enterprise of commercial gases.
Furthermore, it has a big slate of recent tasks to assist keep on monitor for development within the coming years. This could profit shareholders within the type of continued dividend will increase on an annual foundation.
With anticipated annual returns of 6%, we charge the inventory as a maintain proper now.
If you’re curious about discovering extra high-quality dividend development shares appropriate for long-term funding, the next Certain Dividend databases will likely be helpful:
The key home inventory market indices are one other stable useful resource for locating funding concepts. Certain Dividend compiles the next inventory market databases and updates them month-to-month:
Thanks for studying this text. Please ship any suggestions, corrections, or inquiries to assist@suredividend.com.
