Dividend Analysis: Dover Corp.

Dover Corporation (DOV), together with its subsidiaries, manufactures industrial products and components, as well as provides related services and consumables in the United States and internationally. It operates in four segments: Industrial Products, Engineered Systems, Fluid Management, and Electronic Technologies.

Dover Corp is a dividend aristocrat as well as a component in S&P 500 index. It has been increasing its dividends for the past 52 consecutive years. Over the past 10 years the company has delivered an average total return of 3.95 % annually to its loyal shareholders.(Click charts to enlarge.)

At the same time the company has managed to deliver an impressive 9.30 % average annual increase in its EPS.

The ROE declined from a high of 45% in 1999 to a low of 9% in 2002, before rising to 17% in 2007.

Annual dividend payments have increased over the past 10 years by an average of 7.9% annually, which is slightly below the growth in EPS. An 8% growth in dividends translates into the dividend payment doubling every 9 years. If we look at historical data, going as far back as 1984, DOV has indeed managed to double its dividend payments every eight years.

If we invested $100,000 in DOV on December 31, 1997 we would have bought 2768 shares (adjusted for a 2:1 split in December 1997). Your first quarterly check would have been $263 in February 1998. If you kept reinvesting the dividends though instead of spending them, your quarterly payment would have risen to $637 by November 2007. For a period of 10 years, your quarterly dividend has increased by 110.50 %. If you reinvested it though, your quarterly dividend would have increased by 142.17%.

The dividend payout has remained below 30% for the majority of our study period with the exception of a brief spike during 2001-2003. A lower payout is always a plus, since it leaves room for consistent dividend growth minimizing the impact of short-term fluctuations in earnings.

I think that DOV is attractively valued with its low price/earnings multiple of 15 and low DPR. The company however boasts a below average dividend yield. I would consider initiating a position below $40.

Disclosure: I do not own shares of DOV.