The name Dover Corp. (DOV 1.18%) may not be familiar to many investors, but for those who like dividends, it's a name to remember. Dover is among the relatively small family of companies that qualify as Dividend Kings, meaning it has increased its payout every year for at least 50 straight years. Among those approximately two dozen companies, Dover is near the top, having increased dividends for 64 straight years through 2019.
While the company name itself may not be well known, some of the wide array of brands within its operating segments could be. Dover's diversified business falls into five segments: engineered products, fueling solutions, imaging and identification, pumps and process solutions, and refrigeration and food equipment.
A recycling truck, one of Dover's products. Image source: Dover.
A diversity of businesses and brands
The diversity of Dover's business is notable through its many brands. The engineered products segment includes equipment for vehicle service like lifts and clamps, as well as environmental solutions like the Heil truck brand for recycling and waste collection.
Its fueling solutions business serves the vehicle industry with fueling pumps, vehicle washing, fluid handling, and adjacent markets. Pumps and process solutions provides equipment also related to moving fluids in the energy industry.
The imaging and identification segment makes equipment for marking and coding with Markem-Imaje product-marking inkjet printers.
Dover's refrigeration and food equipment business supplies food retailers with cooler and freezer doors by Anthony, display cases by Hillphoenix, and several product lines of food service equipment under Unified Brands.
Its performance
While Dover's stock returned over 50% in 2019, it's more informative to look at the longer-term performance, particularly for investors interested in the income provided by a committed dividend payer. The chart below shows its 10-year stock performance outpacing the S&P 500, and the increasing dividends along the way.
DOV 10 Year Price Returns (Daily) data by YCharts.
The strategic playbook
The company has a four-pronged approach that it will continue through 2020: improving margins and execution, maintaining organic growth, reinvesting in the business, and deploying capital smartly and productively.
Dover reported organic revenue growth of 4% in 2019 and increased earnings per share by 19%, showing the first two items of the playbook were successful. Guidance for 2020 predicts this to continue, with 2% to 3% organic revenue growth and adjusted EPS growth in a range of 4.6% to 7.9%.
The company reinvested in the business with $187 million in capital expenditures in 2019, and plans for $200 million to $220 million in 2020. The final pillar, smartly deployed capital, came in the form of four new acquisitions in 2019, as well as $143 million in share repurchases.
The dividend matters
After reinvesting in the business, Dover produced $758 million in free cash flow in 2019. This left enough to make the strategic acquisitions, invest in opportune share repurchases, and support the $282 million paid out in dividends.
Two bolt-on acquisitions were closed or signed in January 2020. Systech International provides traceability and software solutions in the pharmaceutical industry, and adds to the coding and marking offerings and revenue from Markem-Imaje. Soft-Pak provides business management software for its waste and recycling fleets, as part of Dover's engineered products segment.
For investors wanting a reliable and growing dividend, Dover is a Dividend King that also focuses on moving its business forward. It has a strategy in place to continue investment and growth, while handily covering the current (and predictably growing) dividend.
