The Dow Jones Industrial Average proved to be a solid investment over the past decade: A $10,000 investment in the index 10 years ago would now be valued at $28,200 with dividends reinvested. But as impressive of a wealth builder as the stocks of the Dow Jones have been, numerous individual investments have done far better.
For instance, $10,000 invested in LeMaitre Vascular (LMAT 3.92%) 10 years ago would have turned into $111,800 (with dividends reinvested). Past performance is no guarantee of future performance, but this medical devices specialist looks poised to keep beating the Dow Jones moving forward.
Let's check out LeMaitre's fundamentals to better understand why.
Specialization has been a winning strategy for LeMaitre
With a $1.5 billion market capitalization, LeMaitre doesn't get much attention from investors. But its medical devices aimed at treating peripheral vascular disease are an everyday name among vascular surgeons -- used by over 50% of professionals worldwide. This is because from its founding in 1983 by a fellow vascular surgeon named George LeMaitre, the company has focused intently on appealing to vascular surgeons.
Thanks to this specialized approach, LeMaitre seized the No. 1 or No. 2 market share in nine of the 12 product categories it services, including valvulotomes, angioscopes, and radiopaque tape. The company's momentum, which produced 12% compound annual net sales growth in the past five years, appears poised to continue.
For one, LeMaitre operates in a vast market: It is estimated that the global prevalence of peripheral vascular disease is more than 200 million patients. As the population ages, this number will surely climb higher. That could lead to greater demand for the company's products down the road.
Secondly, LeMaitre's 100-plus sales reps interact with vascular surgeons daily and know what they want. Along with the company's allocation of 8.2% of its $161.7 million in 2022 net sales to research and development, this should help it continue to meet customers' needs. That is why analysts anticipate that LeMaitre's diluted earnings per share (EPS) will surge by 34.2% between 2023 and 2025 to $1.61.
Image source: Getty Images.
A payout with room to run higher
Against the Dow Jones' 2.2% average dividend yield, LeMaitre's 0.8% dividend yield is modest. But this is for a very good reason if you are a growth investor: The company's blistering 366.7% growth in its quarterly dividend per share in the last decade was far exceeded by 907.9% capital appreciation. Simply put, dividend growth hasn't kept up with mindboggling share price growth in recent years.
Looking toward the future, LeMaitre's dividend should continue to grow at a healthy rate. That's because, for 2023, the dividend payout ratio is poised to be less than 47%. This leaves the company with more than enough capital to invest in growth opportunities while also rewarding shareholders with payout raises.
The stock's valuation is buyable
Share prices of LeMaitre are up 58% over the past year. After such a huge rally, it's easy to think you've missed the boat. The stock's forward price-to-earnings (P/E) ratio rocketed to 47.5, well above the medical instruments and supplies industry average forward P/E ratio of 27.
On the other hand, if you're waiting to buy an incredible compounder like LeMaitre on the cheap, you may never get your buying opportunity. This is why dividend growth investors confident in the company's growth prospects should consider buying at the current $67 share price and adding on any corrections.
