Top wealth creators don’t have to be the fastest-growing companies. In an environment where institutional investors are buying earnings safety and dividend income, consistency and reliability are top financial attributes.
And there actually aren’t a lot of companies able to provide consistency in business growth, especially among mature enterprises that throw off excess cash in the form of dividends.
One company that has proven to do so is Airgas, Inc. (ARG) out of Radnor, Pennsylvania.
This business is what I consider to be investment grade. The company sells industrial and medical gases, refrigerants, and ammonia products. It’s one of the leading producers of atmospheric gases in North America with more than 1,100 locations.
In its most recent quarter (ended June 30, 2014), the company’s sales grew three percent to $1.31 billion compared to the same quarter last year. Diluted earnings per share grew four percent comparatively.
Management noted that sales to energy-related customers produced organic sales growth, but sectors such as mining and heavy manufacturing are slow. The company even referred to its most recent quarter as “sluggish.”
This stock has been trading range-bound over the last year, but produced very good capital gains over the last 10 years.
As is the case with most equities securities, the stock trades on future business conditions and growth expectations for its next fiscal year are solid.
The company forecasts its sales will grow at a rate in the low single-digits in the current quarter and that diluted earnings per share will be between $1.27 and $1.32, representing a gain of zero to four percent comparatively.
In its most recent quarter, the company paid out $41.0 million, or $0.55 per share, in dividends. This is a big improvement from the same prior-year quarter, when dividends were $35.0 million, or $0.48 per share.
So Airgas is not the fastest-growing enterprise in the land; it’s still a good business with good consistency in demand and higher-than-normal barriers to entry from competition.
With a two-percent dividend yield, this large-cap is attractive on share price weakness and could make for a good long-term holding.
Often, esoteric businesses, the kind that don’t make the headlines and could even be deemed boring, make for good long-term investments. (See “Three Steady Stocks to Balance High-Flyers & Boost Your Returns.”)