Up to date on February twentieth, 2025 by Felix Martinez
Roper Applied sciences (ROP) has elevated its dividend payout for 32 consecutive years, making it one of many Dividend Aristocrats.
The Dividend Aristocrats are a choose group of 69 shares within the S&P 500 which have had 25+ years of consecutive dividend will increase. We consider they’re among the many finest long-term investments within the inventory market.
You may obtain a full checklist of all Dividend Aristocrats (together with necessary monetary metrics that matter) by clicking on the hyperlink beneath:
Disclaimer: Certain Dividend isn’t affiliated with S&P International in any manner. S&P International owns and maintains The Dividend Aristocrats Index. The data on this article and downloadable spreadsheet is predicated on Certain Dividend’s personal assessment, abstract, and evaluation of the S&P 500 Dividend Aristocrats ETF (NOBL) and different sources, and is supposed to assist particular person buyers higher perceive this ETF and the index upon which it’s primarily based. Not one of the info on this article or spreadsheet is official information from S&P International. Seek the advice of S&P International for official info.
To turn out to be a Dividend Aristocrat, an organization wants a robust enterprise mannequin, sturdy aggressive benefits, and the power to resist world recessions.
The Dividend Aristocrats are high-quality dividend progress shares. Much more interesting is Roper’s excessive dividend progress charge. The latest enhance was a ten% elevate.
Even among the many Dividend Aristocrats, dividend hikes of 10% are uncommon, which makes Roper’s dividend will increase during the last decade very spectacular. This text will talk about Roper’s enterprise, progress potential, and valuation.
Enterprise Overview
Roper designs and develops software program, together with each software-as-a-service and licensed know-how, and engineered merchandise and options. Roper has a various portfolio of services and products, which it offers to a mess of sectors, together with healthcare, transportation, meals, power, water, and training.
Roper focuses on three foremost enterprise segments:
- Software Software program
- Community Software program
- Know-how Enabled Merchandise
Supply: Investor Presentation
The Software Software program enterprise contains Aderant, CBORD, CliniSys, Knowledge Improvements, Deltek, Frontline, IntelliTrans, PowerPlan, Strata, and Vertafore as its foremost merchandise.
The Community Software program enterprise contains its foremost merchandise: ConstructConnect, DAT, Foundry, iPipeline, iTradeNetwork, Loadlink Applied sciences, MHA, SHP, and SoftWriters.
Lastly, the Know-how Enabled Merchandise phase contains CIVCO Medical Options, FMI, Inovonics, IPA, Neptune, Northern Digital, rf IDEAS, and Verathon as its foremost merchandise.
Roper has broadly benefited from the regular enlargement of the U.S. financial system over the previous decade. We consider the corporate can keep a optimistic progress trajectory for a few years going ahead.
Development Prospects
Roper is uniquely positioned to generate sturdy progress throughout its enterprise, even when the broader U.S. financial system faces challenges comparable to inflation and geopolitical threat.
On January thirtieth, 2024, Roper reported sturdy monetary outcomes, with This fall income rising 16% to $1.88 billion and full-year income rising 14% to $7.04 billion. Development was pushed by natural enlargement and strategic acquisitions. Working money circulation reached $2.39 billion, a 16% enhance, whereas GAAP internet earnings grew 13% to $1.55 billion. Adjusted DEPS rose 10% to $18.31, reflecting continued profitability and effectivity.
Supply: Investor Presentation
Aggressive Benefits & Recession Efficiency
Over the previous a number of years, Roper pursued an asset-light enterprise mannequin, with a selected give attention to software program and engineered services and products. The corporate adopted this technique to broaden margins, by decreasing capital expenditure wants, whereas additionally producing recurring income.
This has resulted in a lot stronger money conversion over time and is prone to additional enhance its money conversion ratio transferring ahead.
These elements give Roper super aggressive benefits. Its excessive margins and operational effectivity present it with ample money circulation, which might be invested to remain forward of the competitors.
One other aggressive benefit that Roper has is that it’s extremely diversified throughout the know-how sector. It owns ~27 impartial companies with management positions in area of interest markets. Moreover, these finish markets are fairly diversified and provide sturdy recurring income and buyer retention.
Buyers must also observe that previously, Roper was a cyclical enterprise. It had the capability for very sturdy progress when the financial system was increasing but additionally struggled throughout recessions. Earnings-per-share throughout the Nice Recession are proven beneath:
- 2007 earnings-per-share of $2.68
- 2008 earnings-per-share of $3.06 (15% enhance)
- 2009 earnings-per-share of $2.58 (16% decline)
- 2010 earnings-per-share of $3.34 (29% enhance)
As you may see, Roper was not a extremely recession-resistant firm. Earnings-per-share declined 16% in 2009. If the financial system have been to enter a recession within the years forward, Roper might see earnings decline.
Roper additionally has an amazing dividend progress file, numbering 32 years of consecutive dividend will increase. Over the previous decade, DPS has grown yearly by a median of 14.1%.
We retain our DPS progress projection to 10%, which aligns with Roper’s newest enhance and is well supported by the underlying internet revenue. We count on Roper to develop earnings-per-share at a charge of 10% yearly by 2030.
Valuation & Anticipated Returns
Roper is a high-quality firm with sturdy progress prospects, due to the excessive demand for its know-how. Subsequently, it shouldn’t be stunning that the inventory holds a premium valuation, as shares at present commerce for a price-to-earnings ratio of 29.2. Its P/E a number of is barely above its common valuation over the previous 10 years.
Since rates of interest have risen considerably over the previous 12 months, now we have a goal price-to-earnings ratio of 26. If shares have been to revert to this goal valuation inside 5 years, annual returns can be decreased by 2.5%. Potential overvaluation is a threat that buyers ought to think about earlier than shopping for the inventory.
Nevertheless, this will likely be offset by earnings-per-share progress (anticipated at 10% per 12 months) plus the 0.6% dividend yield, leading to whole anticipated returns of 8.1% per 12 months. This can be a passable projected charge of return for a robust enterprise.
Closing Ideas
Roper has a high-quality enterprise mannequin, and 10% annual earnings-per-share progress isn’t an unreasonable assumption transferring ahead.
The inventory can be a Dividend Aristocrat, and because of the corporate’s excessive earnings progress charge, 10%+ annual dividend will increase are attainable.
Roper matches the invoice of a fantastic firm, however the inventory seems to be overvalued. Whereas the inventory might nonetheless generate strong returns for shareholders, it’s not at present a purchase because it doesn’t exceed our 10% annual return threshold. Roper inventory is a maintain.
Moreover, the next Certain Dividend databases include essentially the most dependable dividend growers in our funding universe:
Should you’re on the lookout for shares with distinctive dividend traits, think about the next Certain Dividend databases:
The foremost home inventory market indices are one other strong useful resource for locating funding concepts. Certain Dividend compiles the next inventory market databases and updates them month-to-month:
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