I’m a bit in a hurry but wanted to share with you guys my recent buy. Today I bought 35 shares of Donaldson for 34,31$ with a yield of roughly 2%. This adds 23,80$ to my forward dividend income. The initial yield is low but as usual there is always a tradeoff between initial yield and dividend growth.
Over the past ten years, Donaldson has raised its dividend by 18,9% per year on average and over the last 5 years by 22,5%. They recently announced a plan to buyback 10% of their outstanding shares and increase to payout maximal payout ratio to 45%. As such, I expect the dividend growth to be as great over the next 5 years at least.
Donaldson currently trades at its 52 weeks low and the average initial yield over the past 5 years has been 1,1%. So at 2%, I guess that we can say that the stock is on sale.
For sure there are reasons for that and one of them is the uncertainty due to copycats who are stealing ground on the company. Donaldson has a narrow moat and competition is fierce and it’s getting tougher.
They just announced that they will make a new acquisition. Buying out “ennemies” is a great way to get rid of them but due to the nature of the business they are in, new enemies can pop up at any given time…
Donaldson has paid and raised its dividend every year for 29 consecutive years and I expect this trend to continue at least for a while. The ride will probably be bumpier than in the past but it’s a very strong company with a nice record, a strong balance sheet, a strong history of rewarding shareholders and as such, I’m very happy with this new addition to my portfolio.
Do you own that stock in your portfolio and if not, why?