Parker-Hannifin (PH) Dividend Stock Analysis

Parker-Hannifin Dividend

(updated 1/01/2017)

The Parker-Hannifin dividend has been paid since 1949 and increased  for 58 consecutive years; qualifying the company as a Dividend King and Dividend Champion. There is some dispute as to why PH is not included in the Dividend Aristocrat list.

Price: $139.96
Current Dividend: $2.52

Dividend Yield: 1.8%
Cash Dividend Payout: 30%

Market Capitalization: 19 B
Enterprise Value: 20 B

Description

Sector: Industrials
Industry: Diversified Industrials

Parker-Hannifin (PH) is a world leader as a manufacturer of motion systems, flow and process control technologies, filtration & engineering materials (together = 83% of revenues), and aerospace systems (17% of revenues).

Product groups include hydraulics, automation, fluid connectors, instrumentation, filtration, engineered materials, and aerospace. The company operates in the United States and 49 other countries.

SWOT Analysis

Strengths

Parker-Hannifin’s diversification across many end markets and countries provides greater stability in what can be a cyclical industry. PH controls its distribution system and provides engineering support through 12,000 stores. This creates an economic moat that makes it difficult for competitors to match.

Weaknesses

PH competes in a cyclical industry that depends on customers capital expenditure investments. Revenue growth is highly correlated with global GDP growth.

Opportunities

Parker-Hannifin specializes in niche products. The company can use its current superior distribution system to supply high margin value added products to existing customers.

Threats

Slowing global growth could have a big impact on Parker-Hannifin’s future growth prospects.

Dividend Analyzer Checklist

(updated November 2016)

Dividend Safety Score (23/33 points)

Dividend Per Share (ttm):  $2.52
Dividend Payout Ratio (ttm):  42%
Dividend Per Share (10 Year Growth):  15%
Cash From Operations (CFO) Per Share (ttm):   $8.54
CFO Dividend Coverage (CFO / DPS): 3.4  (3/6 points)
Free Cash Flow (FCF) Per Share (ttm):  $7.45
FCF Dividend Coverage (FCF / DPS): 3.0  (5/6 points)
Net Financial Debt:  $933 M
Total Assets:   $12057
Net Financial Debt / Total Assets:  8%  (10/12 points)
Net Financial Debt to EBITDA (ttm): 204%
Total Liabilities to Assets Ratio (Qtr.):  62%
Piotroski Score (1-9) (TTM): (5/9 points)

Profitability & Growth Score (11/33 points)

Revenue (10 Year Growth) *CAGR > 4.14%:  1.9%  (0/4 points)
EPS Basic Cont. Operations (10 Year Growth) CAGR > 4.14%: 5.3%  (4/4 points)
Cash From Operations (10 Year Growth) CAGR > 4.14%: 2.1%  (0/6 points)
Operating Earnings Yield (ttm):  7.2%   (3/7 points)
Net Income (ttm):  $807 M
Gross Profit (ttm):  $2537 M
Total Assets:   $12057
Gross Profitability Ratio = GP / Total Assets: 21%  (4/12 points)
Cash Return On Invested Capital (CROIC)(tttm):  13%
Return on Invested Capital (ROIC):  10%
Return on Invested Capital (ROIC) (5 Year Median):  12%
Return on Invested Capital (ROIC) (10 Year Median):  13%

Valuation Score (21/34 points)

Free Cash Flow Yield (ttm):  6.8%  (7/9 points)
EV to EBIT (ttm):   13.8  (5/9 points)
EV to EBITDA (ttm):  11.1 (5/9 points)
PE10:  22.1 (4/7 points)
Price to Sales Ratio (ttm): 1.5
Price to Book Value:  3.6
Price to Earnings Ratio (P/E) (ttm):  20.9

TOTAL POINTS – (55/100) (50 is an average score)

*Compound Annual Growth Rate (CAGR)
**A Compound Annual Growth Rate of 4.14% = a 50% gain over 10 years.

Conclusion

(updated November 2016)

Type of Investor / Recommendation

Large Diversified Dividend Portfolios / Should Be Considered
Looking For Dividend Kings / Good Option
Looking For Exposure to the Industrial Sector /  Average Option
Deep Value Investors /  Avoid

Parker-Hannifin (PH) ranks #99 (out of 247) overall and #34 (out of 59) in the Industrial sector by the Dividend Analyzer. PH is a Dividend King, and an innovative company with sound management.

Portfolio Position Disclosures:
DVB Dividend Kings & Aristocrats – None
DVB Dividend Growth – None
DVB High Income – None
Arbor Asset Allocation Model Portfolio (AAAMP) – None

Disclaimer:
While Arbor Investment Planner has used reasonable efforts to obtain information from reliable sources, we make no representations or warranties as to the accuracy, reliability, or completeness of third-party information presented herein. The sole purpose of this analysis is information. Nothing presented herein is, or is intended to constitute investment advice. Consult your financial advisor before making investment decisions.