Dividend Aristocrat Air Products & Chemicals, Inc. Offers 35% One-Year Total Returns (APD)
By: Ned Piplovic,
Air Products & Chemicals, Inc. (NYSE:APD) has been a dividend aristocrat for more than a decade and has rewarded its shareholders with a 35% total return over the past 12 months.
The Dividend Aristocrat designations indicates that Air Products & Chemicals is a component of the S&P 500 Index with a market capitalization of more than $3 billion and has boosted its annual dividend payout amount for at least the past 25 consecutive years. The dividend hike in the first quarter 2019 marked the 36th consecutive year of annual dividend hikes for Air Products & Chemicals, Inc. The company has held the prestigious Dividend Aristocrat title for more than a decade in a very exclusive group. Currently, only 57 companies — 11.4% of all S&P 500 components — meet the necessary requirement for the Dividend Aristocrat designation.
While the Dividend Aristocrat label indicates a long streak of steady dividend increases, the company accompanied its rising dividend distributions with relatively steady asset appreciation as well. The company’s share price lost more than half of its value during the 2008 financial crisis. This drop was the company’s largest share price decline in the past three decades of its stock trading publicly.
However, after dropping to just slightly above $41 in November 2008, the share price shrugged off the negative influence of the overall market, reversed its direction and embarked on a steady uptrend. With minimal volatility and just a few occasional pullbacks, the share price advanced 440% in just slightly more than a decade.
Driven by the correction experienced by the overall markets, the company’s most recent share price pullback occurred in late 2018. The share price drop was just a trailing indicator of the overall headwinds that Air Products & Chemicals experienced in the fourth quarter of 2018. While the full-year results overall positive, the company missed earnings expectation for the fourth quarter last year.
Financial Results
However, the company came back in the first quarter of 2019 and beat the analysts’ earnings forecast like it did in the first three quarters last year. The adjusted earnings per share (EPS) increased 12% year-over-year to $1.92 in the first calendar quarter 2019, which beat analysts’ adjusted earnings expectations of $1.87 per diluted share by 2.7%. In light of the positive results for what is the second quarter of the APD’s fiscal calendar, the company increased its fiscal 2019 full year adjusted earnings guidance 10% to between $8.15 and $8.30 per diluted share. Additionally, the company adjusted its fiscal third-quarter guidance 8% to 10% higher and now expects adjusted earnings per share between $2.10 and $2.15 for the next earnings report in late July.
Air Products & Chemicals, Inc. (NYSE:APD)
Founded in 1940 and headquartered in Allentown, Pennsylvania, Air Products and Chemicals, Inc. provides atmospheric gases, process and specialty gases, electronics and performance materials. While atmospheric gases include oxygen, nitrogen and argon, rare gases and process gases include hydrogen, helium, carbon dioxide, carbon monoxide and syngas. Additionally, APD produces specialty gases and equipment for the production or processing of gases, such as air separation units and non-cryogenic generators for customers in various industries, including metals, glass, chemical processing, electronics, energy production and refining, food processing, metallurgical, medical and general manufacturing. The company also designs and manufactures equipment for air separation, hydrocarbon recovery and purification, natural gas liquefaction, as well as liquid helium and liquid hydrogen transport and storage.
Dividends
The company’s most recent dividend hike raised the quarterly dividend payout amount 5.5% from $1.10 for the February round of payouts to the current $1.16 quarterly dividend amount. This new quarterly dividend converts to a $4.64 annualized dividend distribution and currently yields almost 2.1%. The rapidly rising share price has pushed the current dividend yield approximately 10% below the company’s own 2.34% average yield over the past five years.
The company started paying a dividend in 1954 and has started its current Dividend Aristocrat streak of 36 consecutive annual dividend hikes in 1983. Over the past 20 years, Air Products and Chemicals has enhanced its annual dividend payout amount nearly 550%. This advancement pace corresponds to an average growth rate of nearly 10% per year. Investors interested in taking advantage of this rising dividend income should consider taking a position before the company’s ex-dividend date on June 28, 2019. Air Products and Chemicals will distribute the next round of dividend payouts to all eligible shareholders on the August 12, 2019, pay date.
Share Price
After trading relatively flat since the beginning of the year, the share price reached its 52-week low of $148.91 on October 24, 2018. A brief attempt at recovery led nowhere and the share price was back down close to its October low level by the end of December. However, the share price assumed a steep uptrend in 2019 and gained nearly 50% before closing at its new all-time high of $221.49 on June 6, 2019. In addition to being nearly 50% above its 52-week low, the June 6, closing price was 32% higher than one year earlier and nearly double its price level from five years ago.
The above-average share price growth and the rising dividend income distributions combined to deliver a total return of 35.2% just over the past year. Over the past three years, shareholders enjoyed a total return of nearly 74%. Moreover, the shareholders more than doubled their investment over the past five years with a total return of 108%.
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