01/06/2020
Ecolab Inc. Stock Special of the month:
Founded in 1923 and headquartered in St. Paul, Minnesota, Ecolab Inc. (ECL) is a diversified company that provides water, hygiene, energy technologies and services, for the hospitality, healthcare, and industrial markets worldwide. The company operates through Global Industrial, Global Institutional, Global Energy, and other segments, and sells its products through field sales and corporate account personnel, distributors, and dealers. Its current total market capitalization of $55.2 billion makes ECL a large capitalization stock (a large-cap stock has a market capitalization value of more than $10 billion) with a long history of consistent earnings growth and dividend payments. It is considered a solid and well-diversified business with a wide economic moat and sustainable competitive advantage over its rivals the company and enjoys outstanding management and corporate culture.
According to Yahoo! Finance, consensus estimates call for the company to earn about $5.86 per share this year, up from $5.25 per share last year, and to go to about $6.51 per share next year. ECL has paid dividends to investors since 1936, and has increased its payments for thirty three consecutive years, which makes it a "Dividend Aristocrat." During the past five years it has increased the dividends at an average rate of 9.94%, with its quarterly payment of 47 cents currently providing a yield of 0.97%.
The value of dividends reinvestment: A hypothetical investment in ECL has grown cumulatively (including dividends reinvested) 21,384.25% during the past forty years. The same investment has grown 12,546.30% during the same period of time, if dividends are excluded from the formula. During the same period, a hypothetical investment in the S&P 500® index (thru the Vanguard 500 Index Admiral (VFIAX) has grown cumulatively (including dividends reinvested) 8,084.36%.
According to calculations of the financial website www.dqydj.com, a periodic monthly investment of $100 in ECL for the past 40 years would has grown to $12,059,713, including dividends reinvested. The stock exhibits a healthy Dividend Payout Ratio (DPR is the proportion of earnings paid out as dividends to shareholders) of 35.3%, which means the company is paying out only 35.3% of all its net income in dividends, and is retaining a good percentage of its earnings to reinvest or grow the business.
Technically (from the chart’s perspective) ECL looks attractive, trading 8.7% below its 52 weeks high, while it is forming a price consolidation pattern between $210 and $181 approximately, in which $181 is acting as a technical support level. The actively managed no-load mutual funds Vanguard Dividend Growth Inv. (VDIGX) and Edgewood Growth Institutional (EGFIX) are major shareholders of ECL, holding 1.4% and 1.0% of its shares respectively. The stock is also one of the 63 holdings of the mutual fund managed by Moneypaper Advisors, the MP 63 Fund (DRIPX). Ecolab’s main competitors are Sealed Air Corp. (SEE) and Sonoco Products Co. (SON)
Volatility and risks: ECL’s five-year Beta (a measure of the volatility, or systematic risk in comparison to the market as a whole as evidenced by the S&P 500® Index) is 0.80, so the stock is 20% less volatile than the Market. Best and worst years during the past 40 years: Its best year was 1982, in which ECL returned, excluding dividends, 69.70%. On the flip side, its worst year was 2008, when the stock declined 31.36%, excluding dividends. ECL’s Dividend Reinvestment Plan charges no fees for cash investing, dividend reinvestment, safekeeping, automatic investment or termination of the plan. With the stock being fundamental and technically attractive, this company is an appropriate holding for investors who wish to build a holding over the long term.
Disclosure: Mario Medina is a long-term investor in Ecolab Inc. (ECL), and his investment strategy consists of investing small amounts periodically (also known as dollar-cost average or DCA), always with a long-term view. The author is the co-manager of the MP 63 Fund (DRIPX), which also holds a position in the company. The author wrote the article himself and it expresses his own opinions. The author has no business relationship with ECL and this article is not intended as a recommendation to invest, as the information published does not take into account any subscriber's personal finances, goals, or risk tolerance. Accordingly, you should be aware of all the risks associated with any financial investment and should consult an independent financial advisor for any personal investment advice.
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