Water is one of the basic necessities of human life. Life as we know it cannot exist without water. For this simple reason, water may be the most valuable commodity on Earth, asserts Bob Ciura, contributing editor at Sure Dividend.
Our top pick in the sector is Lindsay Corporation (LNN). The company provides water management and road infrastructure services in the United States and internationally.
The business’s irrigation segment provides irrigation solutions for farmers and contributed 86% of sales in fiscal year 2022, and the infrastructure segment helps with road and bridge repairs and contributed the other 14%. The conflict in Ukraine has caused a disruption in agricultural activity in that region, leading farmers to plant more intensively in North America.
On April 4th, 2023, Lindsay reported Q2 2023 results for the period ending February 28th, 2023. The business saw diluted earnings-per-share of $1.63, beating analyst estimates and rising from $1.32 for the same period last year. Revenues, however, declined 17% year-over-year to $166 million. The revenue decline was due to a sharp drop in irrigation demand, though the company made up for this via rising profit margins and cost-cutting.
Both irrigation and infrastructure benefit from government support payments. The recent Infrastructure Investments and Jobs Act (IIJA) marks the largest federal investment into infrastructure projects in more than a decade and should boost Lindsay’s infrastructure business. Indeed, Lindsay reported a sharp jump in earnings in 2022 as the company saw growth in both of its business segments.
In 2023, we expect Lindsay to deliver $7.00 in earnings-per-share, making for another year of double-digit earnings growth for the firm. While the revenue shortfall this past quarter is a concern, Lindsay has managed to boost profit margins considerably, and the infrastructure side of the business remains a tailwind as well.
Over the past 5 years, dividend payments have grown at 2.4% annually, and over the past 9 years, dividends have grown at 12.1% annually. We forecast 4% annual dividend growth going forward, though the company has plenty of room for faster dividend increases if it so wishes. Lindsay Corporation has a track record of 20 years of consecutive dividend increases.