As a dividend-growth investor, robust payout hikes tend to get my attention. This is because strong dividend hikes are a sign from management that it hasn't forgotten about its shareholders.
With its market capitalization just over $1 billion, most investors may not be aware of the medical-device maker named LeMaitre Vascular (LMAT 1.19%). But after the company announced a 12% raise in its quarterly dividend per share to $0.14 (its 10th straight year of dividend growth since it started paying a dividend), this arguably deserves to change. Here's why the vascular medical-device manufacturer may deserve to be on your radar as a dividend-growth investor.
LeMaitre has healthy organic sales growth
LeMaitre may not be a household name among investors. But in niche markets within the peripheral vascular disease (PVD) medical-devices space, vascular surgeons know the company quite well. LeMaitre has the highest or second-highest share in nine of the 12 medical device markets it operates in. These include its valvulotomes, carotid shunts, angioscopes, and occlusion catheters to name just a few of LeMaitre's leading products.
The medical device company reported $41 million in sales for its fourth quarter ended Dec. 31, which was up 3.7% over the year-ago period. And digging deeper, LeMaitre's results were even better than this in the quarter. That's because the company's international presence during a time when the U.S. dollar is outperforming foreign currencies weighed on sales by approximately 4%. Thus, LeMaitre's organic sales (factoring out currency exchange) grew 8% during the quarter. This solid top-line growth was driven by double-digit growth in sales of bovine patches (up 11%), bovine grafts (also 11% higher), and carotid shunts (24% growth).
LeMaitre's diluted earnings per share (EPS) dipped 9.3% year over year to $0.25 in Q4. Faster growth in cost of sales (10%) and total operating expenses (8.1%) resulted in a 190 basis-point contraction in net margin to 13.7% for the quarter. This dip in profitability and a 0.5% increase in LeMaitre's outstanding diluted share count explain how sales grew at a faster clip than diluted EPS during the quarter.
It's estimated that rising obesity rates and physical inactivity will lead the global PVD market to reach nearly $8 billion by 2030. As LeMaitre grows both organically and with future acquisitions, the company should have no problem generating respectable diluted EPS growth over the next few years.
Image source: Getty Images.
LeMaitre has a payout that can keep rising
LeMaitre's 1.1% dividend yield is below the S&P 500 index's 1.7% yield. The company may not be enticing to income investors. But with the quarterly dividend per share having nearly quadrupled over the last 10 years (before even considering the most recent dividend hike), LeMaitre is a dividend-growth pick.
LMAT Dividend data by YCharts
And given that the dividend-payout ratio will come in around 48% in 2023, LeMaitre has the capital needed to fund further growth opportunities. This is why there appears to be plenty of room for future dividend growth for the company.
LeMaitre's valuation is within reason
Share prices of LeMaitre did quite well over the last year, up 8% during that time. Despite this performance in a down market, the stock's valuation still doesn't seem to be excessive.
LeMaitre's trailing-12-month dividend yield of 1.1% is the same as its 10-year median of 1.1%. If that wasn't convincing enough, the company's Shiller price-to-earnings (P/E) ratio of 57.3 is considerably lower than its 10-year median of 91.9. For a business whose fundamentals appear to be intact, this is an attractive valuation. That's probably why analysts have an average 12-month price target of $58, which is 17% upside from the current $49 share price.
