Leading cleaning and sanitation products maker
) has increased its quarterly cash dividend to 23 cents from 20
cents, representing a 15% growth. This increases the annual
dividend to 92 cents per share from the current payout of 80
cents, which equates to a dividend yield of roughly 1.3%. The
revised quarterly dividend is payable on December 28, 2012, to
shareholders of record as on December 18, 2012.
This represents the company's 21
consecutive annual dividend increase, reflecting its commitment
to deliver incremental returns to investors leveraging a solid
free cash flow and strong earnings. The company's previous
dividend increase was in December 2011, when it raised the
quarterly payout by 14.3% to 20 cents a share from 17.5
The company's share prices inched up 1.7% to close at $72.39
on December 6, 2012. This is quite expected as dividend hike has
been a regular practice for the past 20 years.
Ecolab has a strong liquidity position to support the dividend
hike. It exited the third quarter of 2012 with cash and cash
equivalents of $324 million, up 56.3% from the previous-year
The company continues to invest in strategic areas such as
health care, food, water and energy and global pest elimination
to expand its business. Apart from boosting shareholders return,
Ecolab also utilizes its cash balance to acquire complementary
businesses to drive long-term growth.
In an effort to expand its Global Energy Services franchise,
Ecolab in October 2012, agreed to acquire privately-owned
Champion Technologies and its related company Corsicana
Technologies. This is Ecolab's biggest acquisition since the
company acquired Nalco in 2011. Following the closure of the deal
by year-end, the company is slated to become a giant in the
oilfield chemical business.
Moreover, the company has been delivering strong earnings, as
it has managed to meet the Zacks Consensus Estimate in three of
the last four quarters while beating the same by 4.17% on one
occasion. The current Zacks Consensus Estimates for the fourth
and the full-year 2012 are 89 cents and $2.98, respectively.
However, we remain cautious about acquisition-related risks
and the company's increasing debt. Raw material price
fluctuations and tough competition from the likes of
The Clorox Company
Church & Dwight Co. Inc.
) remains potential headwind.
We currently have a 'Neutral' recommendation on Ecolab. The
stock carries a short-term Zacks #3 Rank (Hold rating).
St. Paul, Minnesota-based Ecolab serves the food service, food
and beverage processing, healthcare, energy, water treatment and
hospitality markets both in the U.S. as well as
CHURCH & DWIGHT (CHD): Free Stock Analysis
CLOROX CO (CLX): Free Stock Analysis Report
ECOLAB INC (ECL): Free Stock Analysis Report
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