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Summary

  • Wolters Kluwer is a predictable company with predictable results.
  • The dividend is 3.5% and increasing each year.
  • Wolters Kluwer is a good long term investment.

Wolters Kluwer (OTCPK:WTKWY) (OTC:WOLTF) is an information solutions provider from The Netherlands. Wolters Kluwer is a predictable company. Big revenue growth cannot be expected, but the profitability is healthy and a dividend of 3.5% is good. Wolters Kluwer is a good long term investment.

Wolters Kluwer (x1M)

2013

2012

2011

2010

2009

Revenue

$4,920

$4,964

$4,629

$4,565

$4,727

Net income

$477

$429

$163

$396

$152

EBIT

$854

$784

$602

$687

$323

EBIT%

17.36%

15.79%

13.00%

15.05%

6.83%

FCF

$400.2

$503.7

$129.7

$197.3

$459.5

EPS

$1.59

$1.44

$0.55

$1.32

$0.57

PE

17.70

Dividend

$0.97

$0.95

$0.94

$0.92

$0.91

Dividend Yield

3.44%

Dividend paid

$319

$311

$313

$163

$173

75% of the revenue is through recurring subscriptions and customers are "resilient" in keeping their subscriptions.

The main divisions of Wolters Kluwer are:

  • Legal & Regulatory with an EBIT% of 31%
  • Tax & Accounting with an EBIT% of 20%
  • Health with an EBIT% of 25%
  • Financial & Compliance Services with an EBIT% of 8%

(Source: Confero)

Investing

Three quarters of revenue is recurring with subscriptions from loyal existing customers. This is a good indicator of future revenue and results. Wolters Kluwer aims for an organic growth of about 1% a year, which is modest.

Because revenue growth is limited, the dividend is the most important factor. Wolters Kluwer aims to increase dividend each year. Dilution will also be prevented with a buyback policy.

The paid dividends are 35% to 55% of the EBIT and lower than the available free cash flow. The dividend policy is viable and can be sustained.

Wolters Kluwer is a very predictable company with predictable revenue, predictable results and a predictable strategy. But boring is beautiful for the dividend investor.

With a dividend yield of 3.4% and a PE of 17.7 Wolters Kluwer is not an expensive stock and a worthy to keep for the long term.

Writing covered call options and (limited) uncovered put options can increase the yield.

Disclosure: I am long WOLTF. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Source: Wolters Kluwer: Predictable Results With A Good Dividend