Parker-Hannifin (PH) Stock Analysis

Parker-Hannifin Dividend

Parker-Hannifin (PH) has paid a dividend since 1949 and increased its dividend for 68 consecutive years; qualifying the company as a Dividend King, Dividend Aristocrat, and Dividend Champion. There is some dispute as to why PH is not on some Dividend Aristocrat lists.

Long time customer relationships, reliable customer service, and a large diversified product selection provide a small moat for Parker-Hannifin.

Current Dividend Annualized: $6.52

Parker-Hannifin (PH) Intrinsic Value – Margin of Safety Analysis            

(updated December 2024)

Normalized Diluted Earnings Per Share (TTM): $22.19
Free Cash Flow Per Share (TTM): $23.64
Cash Flow Per Operations Per Share (TTM): $26.69

Estimated Intrinsic Value: $440

Target Buy Price Based on Required Margin of Safety =  $367
(Required Margin of Safety Based On Risk Stability Grade:

A = 0%, B = 20%, C = 40%, D = 60%, F = 80%)

Target SELL Price Based on Estimated Intrinsic Value = $550
(Allow Overvaluation Adjusted by Risk Stability Grade:

A = 35%, B = 25%, C = 15%, D = 5%, F = 0%)

Risk / Stability Grade:  B

A grade indicates a quality company with a strong balance sheet, high earnings quality, and a positive business environment. These stocks require the slimmest margin of safety within the stock universe.

B grade indicates a company with a good balance sheet, good earning quality, and a stable business environment. The margin of safety required should be greater than stocks with an A grade but less than the average stock.

C grade indicates a company with a sufficient balance sheet, at least average earnings quality, and a reasonably stable business environment. The margin of safety required is greater than A & B stocks, but less than D & F stocks.

D grade indicates a company in good standing but has issues that could affect its stability and long term risks. D rated stocks should require a large margin of safety when purchased.

F grade indicates a company with significant issues that are currently affecting its stability and long term risks. Require an extremely large margin of safety for F rated stocks when purchased.

Financial Risk Grade:  B

A grade indicates an extremely low probability of a dividend cut. This rating is reserved for companies with strong balance sheets and/or excellent dividend histories.

B grade indicates a low probability for a dividend cut.

C grade indicates a low probability for a dividend cut and/or average safety risk.

D grade indicates there are issues that should be considered concerning future dividend payments.

F grade indicates serious dividend safety risks. Investors should complete comprehensive due diligence before investing.

Business Quality Grade:  B

A grade indicates earnings quality is high or far above average.

B grade indicates earnings quality is good or above average.

C grade indicates earnings quality is acceptable or average.

D grade indicates earnings quality is poor or below average requiring thoughtful due diligence.

F grade indicates the quality of the earnings is poor or far below average requiring serious due diligence.

Earnings Report: 9/30/24

AAAMP Portfolios Position Disclosures:
Treasure Trove Dividend (TTD) –  None
Global Dividend Value-(GDV) – None
Dividend Growth & Income (DGI) – None
Global Value (GV) –  None
Global Value Aggressive (GVA) – None
Global Conservative Income (GCI) – None 
Global Aggressive Income (GAI) – None

Why is Parker-Hannifin Still A Dividend King?

Many people question why PH still qualifies as a Dividend King even though they didn’t raise their dividend for 2 1/2 years ( between August 2014 and February 2017).  The consecutive years of increase measurement is not dependent upon the quarterly dividend being increased, but whether the company increases the dividend per share paid per year. In addition it can be calculated according to the the company fiscal year which for PH is July 1st – June 30th. Because of the timing of the increases each fiscal year has been higher. The PH dividend by fiscal year during this period: 2014: $1.86, 2015: $2.37, 2016: $2.52, 2017: $2.58.

Company Description

Sector: Industrials
Industry: Diversified Industrials

Parker-Hannifin is an industrial conglomerate operating out of two segments: diversified industrial, which serves a variety of end markets, and aerospace systems, which sells engine and actuation components.

The diversified industrial segment consists of six groups, including engineered materials (sealing devices), filtration (filters and systems monitoring and removing contaminants from liquids and gases), fluid connectors (valves, couplings, and other fittings), instrumentation (flow manufacturing components and fluid control applications), and motion systems (hydraulic, pneumatic, and electromechanical components in industrial machinery and equipment). The segment boasts 16,900 independent distributors and nearly 40% of its business occurs outside of North America.

SWOT Analysis

Strengths

Parker-Hannifin’s diversification across many end markets and countries provides greater stability in what is a cyclical industry. PH controls its distribution system and provides engineering support through a network of nearly 17,000 independent distributors around the globe. This creates an economic moat that makes it difficult for competitors to match.

PH is especially excelling in the aerospace sector where it is gaining market share in the recurring aftermarket. Again, its worldwide distribution system is providing a competitive advantage that is contributing to its success.

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. The company has the financial strength to make acquisitions.

Threats

Slowing global growth could have a big impact on Parker-Hannifin’s future growth prospects. Sales increase and decline with the fortunes of global industrial production.

The rapid growth in the Internet of Things (IoT) is causing other industrial companies to enter markets that PH is currently serving. Competition can reduce margins and is a concern that should be monitored.

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.