Up to date on October 18th, 2023 by Felix Martinez
Tennant Firm (TNC) has elevated its dividend for over 50 years. Consequently, it has joined the listing of Dividend Kings.
The Dividend Kings are a gaggle of 51 shares which have elevated their dividends for at the least 50 years. We consider the Dividend Kings are among the many highest-quality dividend development shares to purchase and maintain for the long run.
With this in thoughts, we created a full listing of all 51 Dividend Kings. You possibly can obtain the total listing, together with essential monetary metrics reminiscent of dividend yields and price-to-earnings ratios, by clicking on the hyperlink beneath:
Tennant Firm is a dependable dividend development inventory that may enhance its dividend, even throughout recessions.
On the similar time, the inventory seems undervalued, making Tennant Firm inventory a purchase for dividend development traders.
Enterprise Overview
Tennant Firm is a equipment firm that produces cleansing merchandise and presents cleansing options to its clients. Within the US, the corporate holds the market management place in its trade, however the firm additionally sells its merchandise in additional than 100 further nations across the globe. Tennant was based in 1870.
Tennant Firm reported its second-quarter earnings outcomes on August 4th. The corporate generated revenues of $321.7 million throughout the quarter, which was 14.8% increased year-over-year. Income was additionally up sequentially.
Tennant Firm generated adjusted earnings-per-share of $1.86 throughout the quarter, a 102.6% enhance in comparison with $0.92 in Q2 2022.
Supply: Investor Presentation
Administration is forecasting that adjusted earnings-per-share will enhance between $5.10 to $5.75 in 2023, which might be an enchancment on the midpoint versus 2022, which implies new report income for the present yr.
Development Prospects
Tennant Firm’s earnings-per-share had been fairly lumpy over the past decade. Total, the pattern pointed upward, however there have been loads of ups and downs; the corporate has not been capable of develop its earnings constantly.
Between 2010 and 2021, Tennant Firm recorded a median annual earnings-per-share development price of seven%.
Nevertheless, Tennant Firm’s earnings-per-share noticed some ups and downs in that time-frame, reminiscent of in 2017, when income had been down significantly in comparison with the earlier yr.
The corporate expects 2022 to be a powerful yr total.
Supply: Investor Presentation
Tennant has plans to develop its gross sales inorganically, particularly within the Asia/Pacific area, the place it advantages from above-average market development charges.
The takeover of Chinese language cleansing tools firm Gaomei improved Tennant’s gross sales outlook within the Chinese language market, in addition to in different Asian markets, over the subsequent couple of years.
Synergies from this acquisition and different strikes to bolster the general profitability and the enterprise in Asia will more and more repay and will ship engaging earnings development for Tennant.
We anticipate 6% annual earnings-per-share development over the subsequent 5 years for Tennant.
Aggressive Benefits & Recession Efficiency
Tennant Firm is the chief within the US cleansing machines market. This serves as a aggressive benefit, as Tennant Firm’s market management permits for higher economies of scale and a superior gross sales community in comparison with its friends.
Over the last monetary disaster, Tennant remained worthwhile, however its earnings nonetheless suffered significantly. Tennant’s earnings-per-share all through the Nice Recession of 2007-2009 are listed beneath:
2007 earnings-per-share of $1.79
2008 earnings-per-share of $1.35 (24.6% decline)
2009 earnings-per-share of $0.65 (51.8% decline)
2010 earnings-per-share of $1.31 (101.5% enhance)
As you’ll be able to see, Tennant’s earnings-per-share declined considerably in 2008 and 2009, displaying the corporate is susceptible to financial downturns. The corporate proceeded to greater than double its earnings-per-share in 2010, displaying it could rebound rapidly from recessions.
The corporate reported earnings-per-share development in 2020 and 2021 when the coronavirus pandemic despatched the U.S. economic system right into a recession.
Valuation & Anticipated Returns
Tennant is predicted to generate earnings-per-share of $5.57 for 2023. Based mostly on this, the inventory trades for a price-to-earnings ratio of 14.4. Our truthful worth estimate is a price-to-earnings ratio of 18. Thus, the inventory seems considerably undervalued. An increasing price-to-earnings ratio may enhance annual returns by 5.9% yearly over the subsequent 5 years.
Future returns may even be comprised of earnings-per-share development and dividends. We anticipate Tennant to develop earnings-per-share annually by 6.0%, consisting of natural income development and acquisitions.
As well as, shares have a 1.4% present dividend yield. The mixture of valuation modifications, earnings development, and dividends leads to whole anticipated returns of 13.3% per yr over the subsequent 5 years. We price the inventory a purchase.
Tennant Firm has been valued at excessive multiples all through the final decade. That is considerably shocking, as its development has been strong however not excellent. Nonetheless, primarily based on our earnings-per-share estimate, shares are buying and selling beneath what we deem a good valuation for the corporate.
Tennant has a safe dividend, with a projected dividend payout ratio of about 18% for 2023. This provides the corporate sufficient room to proceed rising the dividend at a price consistent with its adjusted EPS development price.
Ultimate Ideas
Tennant Firm is the chief within the area of interest market that the corporate serves. Natural development and acquisitions ought to gas a strong development price over the subsequent a number of years. Shareholders also needs to see continued dividend will increase annually.
Following a modest 2022, Tennant will possible see its income rise additional in 2023. Tennant shares have excessive anticipated whole returns, which is why we price the inventory a purchase.
If you’re taken with discovering extra high-quality dividend development shares appropriate for long-term funding, the next Positive Dividend databases can be helpful:
The main home inventory market indices are one other strong useful resource for locating funding concepts. Positive Dividend compiles the next inventory market databases and updates them month-to-month:
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