This Dividend Aristocrat Has A Whopping 45% Upside
In the last month, the four major indexes have traded in positive territory.
- Nasdaq Composite is up 1.39%
- S&P 500 is up 3.89%,
- Russell 2000 is up 5.59%
- Dow Jones Industrial is up 7.65%
Now, let's face it. Single-digit percentages up/down aren’t usually a huge motivator for many traders. But, any positivity is welcome after the market's dismal performance YTD.
This article highlights one company with that, if analysts are correct, has a whopping 45% upside potential.
Linde Plc (LIN)
Linde Plc is a multinational diversified industrial gas, chemical, and engineering conglomerate. It is one of the leading companies in industrial gases and the engineering sector. The company was created in October 2018 through the union of Linde AG and Praxair. Its headquarters are in Dublin, Ireland, and Woking, Surrey, UK. Additionally, the company employs over 72,327 employees (2021).
Today, Linde has operations all over the world and are mainly divided into two segments:
- The Gases segment provides industrial gases, specialty gases, medical gases, refrigerants, and other chemicals to various clients from different industries.
- The Engineering segment, famously known as Linde Engineering, offers design and construction services for building large-scale chemical plants used to produce industrial gases. This segment has built over 4,000 plants worldwide. It also has over 1,000 process patents.
In recent years, Linde has made a few changes to its administrative structure. On October 25, 2021, the company named Sanjiv Lamba as the Chief Executive Officer (CEO), which went into effect on March 1, 2022. On the same date, the company appointed two new directors, Joe Kaeser and Alberto Weisser.
Stockholder information
The Vanguard Group, Inc. is LIN's largest shareholder, with a 9.29% stake in the company. The company's second and third largest shareholders are - Blackrock Inc. and State Street Corporation, respectively.
Financials
On July 28, 2022, the company released its financial results for the second quarter. For the quarter ending June 30, 2022, LIN's revenue was $8.457 billion representing an increase of 12% from that of the previous year. Also, its earnings per share (EPS) came in at $3.10, representing a surprise of 4.03%.
Linde Plc will also report its latest third-quarter earnings results on October 27, 2022. Consensus is looking for $2.94 in earnings per share, representing an increase of 7.69% over the previous year. And if the next quarter's results are to repeat themselves, there could be a surprise (to the upside), which could result in the stock gapping up.
Dividend
Linde Plc has increased its dividend for 29 consecutive years. The company is also listed in the S&P 500 index, placing this company on the coveted Dividend Aristocrats list.
Additionally, on October 24, 2022, the company announced its quarterly dividend of $1.17 per share payable on December 16, 2022, to shareholders of record on December 2, 2022. LIN’s annual dividend is $4.68 representing an annualized dividend yield of 1.66% based on the stock's latest trading price. In addition, the company has a modest dividend payout ratio of 38%, which allows for share repurchases and growth.
Dividend growth investors will note that Linde Plc typically announces dividend increases in February, and if history is to repeat itself, the company should increase its dividend ~10% to around $5.14.
What the analysts say
Linde Plc has a market cap of $143 billion and trades at a P/E ratio of 24.48, which is higher than the US Chemicals industry’s average P/E ratio of 16.7. This indicates that the stock could be overvalued.
Analysts maintain a “Strong Buy” rating across the board. Furthermore, this stock's “high target” is $404 - representing a potential >45% upside for investors.
Why I like Linde Plc
Buying companies before the earnings can be risky. But, with their products used in multiple sectors, the company has durable competitive advantages. Add to that a management team committed to delivering shareholder value (which is reflected in their financials), and I think this could be a home run in 12 months' time.
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On the date of publication, Rick Orford did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes.
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