Dividend Aristocrats In Focus: Air Products & Chemicals

Up to date on March twenty first, 2025 by Bob Ciura

Air Merchandise & Chemical compounds (APD) might not be probably the most well-known firm. It’s primarily a business-to-business producer and distributor of commercial gases.

Nonetheless, Air Merchandise & Chemical compounds is an elite dividend inventory as a member of the Dividend Aristocrats, a bunch of dependable dividend shares with 25+ years of consecutive dividend will increase.

We imagine the Dividend Aristocrats are among the many greatest dividend development shares to purchase for the long term.

With that in thoughts, we created a listing of all 69 Dividend Aristocrats, together with necessary metrics like price-to-earnings and dividend yields.

You may obtain a duplicate of our Dividend Aristocrats checklist by clicking on the hyperlink under:

Disclaimer: Certain Dividend isn’t affiliated with S&P International in any means. S&P International owns and maintains The Dividend Aristocrats Index. The data on this article and downloadable spreadsheet relies on Certain Dividend’s personal evaluate, abstract, and evaluation of the S&P 500 Dividend Aristocrats ETF (NOBL) and different sources, and is supposed to assist particular person traders higher perceive this ETF and the index upon which it’s based mostly. Not one of the info on this article or spreadsheet is official information from S&P International. Seek the advice of S&P International for official info.

Air Merchandise & Chemical compounds’ dividend historical past – 43 years of consecutive dividend will increase – signifies that the corporate is a mannequin of consistency.

The corporate has reinvented itself in recent times. A by-product and a separate vital divestiture had been applied with the purpose of streamlining the corporate’s enterprise mannequin and specializing in its core industrial gasoline operations.

Air Merchandise & Chemical compounds seems poised to proceed elevating its dividend for a few years to come back.

Enterprise Overview

Air Merchandise & Chemical compounds is without doubt one of the largest producers and distributors of atmospheric and course of gasses on the planet. Its clients embody different companies within the industrial, know-how, vitality, and supplies sectors.

Air Merchandise & Chemical compounds was based in 1940 and has a present market capitalization of ~$65 billion.

It additionally has a major worldwide presence. Roughly 40% of the corporate’s annual gross sales are generated within the U.S. and Canada, with the rest unfold throughout Latin America, Europe, and Asia.

Air Merchandise & Chemical compounds reported monetary outcomes for the primary quarter of fiscal 2025 in February. Income of $2.93 billion throughout the quarter, declined 2.3% year-over-year, lacking the analyst consensus estimate by $10 million.

Supply: Investor Presentation

The corporate’s prices declined much more than revenues, which nonetheless allowed for some earnings development in comparison with the earlier yr’s quarter.

Air Merchandise & Chemical compounds was capable of generate earnings-per-share of $2.86 throughout the first quarter, which was up 1% in comparison with the earlier yr’s interval. EBITDA was up 1% as nicely throughout the interval.

Following a document yr in 2024, Air Merchandise & Chemical compounds is guiding for an additional document revenue in fiscal 2025, with earnings-per-share seen at $12.70 to $13.00. The steerage implies an earnings-per-share development charge of round 3% this yr.

Development Prospects

The streamlining initiatives undertaken by Air Merchandise & Chemical compounds previously a number of years have led to vital profitability enhancements for the economic gasoline large. The corporate’s EBITDA margin development during the last a number of years could be seen under:

Air Merchandise & Chemical compounds has expanded its adjusted EBITDA margin by ~1400 foundation factors for the reason that second quarter of 2014 – a major enchancment, which has mixed with rising adjusted EBITDA to drive increased earnings-per-share and dividends.

It can additionally develop as a consequence of worldwide growth, as the corporate’s Gases Asia enterprise has delivered the very best development charge within the current previous, though its American enterprise stays the most important phase.

Air Merchandise & Chemical compounds has numerous development tasks both not too long ago accomplished or scheduled to be accomplished within the coming months.

Supply: Investor Presentation

Investments in NEOM will drive its inexperienced vitality publicity and broaden its presence in Saudi Arabia, whereas Air Merchandise & Chemical compounds can be is increasing its hydrogen footprint in a number of markets, investing closely in recent times and for the foreseeable future on this business with a view to profit from the anticipated market development within the coming years.

These investments, coupled with margin development initiatives, ought to result in significant earnings development for the corporate over the approaching years. We count on 6% annualized EPS development over the subsequent 5 years.

Aggressive Benefits & Recession Efficiency

Air Merchandise & Chemical compounds has numerous aggressive benefits. The primary and first benefit the corporate has is its measurement and market share.

Furthermore, the economic gasoline distribution enterprise advantages from excessive switching prices. These prices could not essentially be monetary – as an alternative, clients are unlikely to change as soon as their gasoline wants are being met by a specific provider as a result of it could be troublesome to discover a competitor that provides similar providers in a specific geographic area.

To that finish, Air Merchandise & Chemical compounds’ measurement additionally advantages the corporate.

The corporate’s current divestitures and asset gross sales have given it an infusion of money, bolstering its company funds in a means that ought to assist it endure any upcoming financial downturns. Furthermore, Air Merchandise & Chemical compounds has a observe document of performing fairly nicely throughout previous recessions.

Take into account the corporate’s efficiency throughout the 2007-2009 monetary disaster for proof of this:

2007 adjusted earnings-per-share: $4.40
2008 adjusted earnings-per-share: $4.97 (13% enhance)
2009 adjusted earnings-per-share: $4.06 (18.3% decline)
2010 adjusted earnings-per-share: $5.02 (23.6% enhance)

Air Merchandise & Chemical compounds skilled an 18.3% decline in adjusted earnings-per-share in 2009 throughout the monetary disaster, however the firm’s backside line surged to a brand new excessive by 2010.

The corporate additionally remained extremely worthwhile in 2020, a troublesome yr for the worldwide financial system because of the coronavirus pandemic.

The U.S. financial system entered a recession because of the pandemic, however Air Merchandise & Chemical compounds skilled solely a gentle dip in earnings, which allowed it to proceed elevating its dividend.

Valuation & Anticipated Complete Returns

With a 6% anticipated EPS development charge, along with a 2.4% dividend yield, one would possibly anticipate excessive single-digit annual returns from the safety.

Nonetheless, it’s crucial to contemplate how valuation can impression future returns.

Utilizing $12.85 because the anticipated fiscal 2025 adjusted earnings-per-share, and a share value of $291, the safety is presently buying and selling arms at 22.6 instances anticipated earnings.

For context, the inventory has traded at a median earnings a number of nearer to 19 during the last 10 years.

We imagine that 20 instances earnings is a good valuation estimate for Air Merchandise & Chemical compounds, which means shares are barely overvalued. Imply reversion to a price-to-earnings ratio of 20 may decrease annualized returns by -2.4% over a 5-year time horizon.

As such, we count on whole annual returns to encompass the next:

6% earnings-per-share development
2.4% dividend yield
-2.4% P/E a number of compression

We count on whole annual returns of 6.0% per yr via 2029.

Last Ideas

Air Merchandise & Chemical compounds is a robust dividend development inventory, having raised its dividend every year for the previous 43 years.

The corporate has de-risked its enterprise mannequin and that enterprise transformation permits it to deal with its core enterprise of commercial gases.

Furthermore, it has a big slate of recent tasks to assist keep on observe for development within the coming years. This could profit shareholders within the type of continued dividend will increase on an annual foundation.

With anticipated annual returns of 6%, we charge the inventory as a maintain proper now.

If you’re inquisitive about discovering extra high-quality dividend development shares appropriate for long-term funding, the next Certain Dividend databases will likely be helpful:

The main home inventory market indices are one other strong useful resource for locating funding concepts. Certain Dividend compiles the next inventory market databases and updates them month-to-month: