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ABM Industries: A Dividend Machine Becoming The Next Dividend King

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The Dividend Guy


  • ABM is the next in line to become a Dividend King with 49 consecutive years with a dividend raise.
  • Its 2020 Vision program will enable to expand margins in the future.
  • According to two valuation methods, ABM is currently overpriced.

Investment Thesis

An investment in ABM is like buying a money making machine. Strong from its leader position in the end-to-end facility solutions, ABM is receiving recurring payments from their contracts across the U.S. and 20 other countries. While margins are very thin, management is implementing a solid process (2020 Vision) to improve efficiency and optimize costs. The company shows a very strong dividend growth history, but is it enough to convince investors to enter in a new position at this price? Let’s dig deeper.

Understanding the Business

Founded in 1909, ABM Industries Inc is engaged in providing end-to-end integrated facility solutions to commercial, industrial, institutional, retail, residential, and governmental facilities located throughout the United States. Their services include electrical and lighting, energy solutions, facilities engineering, HVAC and mechanical, janitorial, landscape and turf, mission critical solutions and parking.

In 2016, they put their Government division for sale, which was part of the Business & Industry division. Lately in June 2017, they announced the acquisition of this segment by Valiant Integrated Services. The reason why ABM sold its activities is to pursue their 2020 Vision program. This is another multi-year business revision process leading to cost optimization, margin improvement and organizational realignment.

We can appreciate the effort as ABM is evolving in a low operating margin business. Their 2017 margin project per sector goes from low 4% to 8% range. This doesn’t leave much room for bad luck.


Source: Ycharts

ABM grows its business from various acquisitions over the years. They benefit from a fragmented environment leading to many mergers possibilities. Since 2014, they have made the following acquisitions: GBM (leading provider of facilities in the U.K.), Airco, Alpha Mechanical and Westway (U.K.-based as well).

While they grow by adding smaller businesses, management is currently refocusing the company activities and sell

This article was written by

The Dividend Guy profile picture
My name is Mike and I’m the author of The Dividend Guy Blog & The Dividend Monk along with the owner and portfolio manager here at Dividend Stocks Rock (DSR). I earned my bachelor degree in finance-marketing, own a CFP title along with an MBA in financial services. Besides being a passionate investor, I’m also happily married with three beautiful children. I started my online venture to educate people about investing and to be able to spend more time with my family. I started my career in the financial industry back in 2003. I earned several promotions along with a good pile of diplomas. I had lots of fun working with clients in private banking for half a decade, but thought I could do more with my life. In 2016, I decided to take a leap of faith and left everything behind to travel across North America and Central America with my family. We drove through nine countries and stayed three months in Costa Rica before returning home. This was an eye-opening adventure that led me in 2017 to quit my job in the financial industry and pursue my dream; helping others with their personal finance through my investing websites. You just found the reason why I quit my suit & tie job!

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. 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.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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