Ingersoll Rand (IR) is a reliably "boring" cash cow; the firm makes its living in HVAC — heating air, cooling air and cleaning air, observes Michael Foster, editor of Contrarian Outlook.

Three-quarters of Ingersoll's business comes from heating, cooling and refrigeration. The next building you walk into is probably heated and cooled by one of the company's Trane units.

About 85% of its business involves replacing existing units, so its gig is about as sweet as our fabled HVAC technician. Just sit around, wait for the phone to ring and get paid.

Last year, the firm gave its shareholders an 18% dividend raise. Over the last five years, it's more than doubled its dividend (+112%). And we're buying shares today because they haven't kept up with their payout.

There is significant upside unaccounted for. We'll catch it thanks to the power of this stock's dividend magnet, which we expect will pull the shares higher.

The company is due for another generous dividend hike later this year. And the management team is excitedly using its extra cash to buy back shares, repeatedly stating that they are "trading below their intrinsic value." With IR's free cash flow (FCF) likely to exceed its net income in 2019, there will be plenty of cash to go around.

Customers are becoming increasingly demanding about energy efficiency. Of course the higher bar from customers is a good thing, with Ingersoll doing 85% of its business as older units are upgraded and replaced. And the firm's backlog has never been bigger as we head into its fiscal 2019.

But wait — aren't tariffs a potential problem for Ingersoll? While worries may have weighed on IR shares in 2018, they were misguided. IR smartly makes most of the products in the US that it sells in the US; it does the same in the Chinese market.

In 2018, Ingersoll deployed its spare $1.7 billion into $285 million in acquisitions, $480 million in dividends, and $900 million in share repurchases.

With 2019 cash flow ready to outpace paper profits, there should be plenty of money for all three buckets. The company currently has $500 million penciled in for repurchases, which would take an additional 2% of the company off the market.

A generous September dividend increase should be no problem. Ingersoll is paying just 36% of its profits as payouts, less than it was dishing out before its latest dividend double.

This stock should be about 20% to 25% higher to account for its recent dividend growth alone. Plus more hikes are on the way. Add it all up and we have a compelling case that Ingersoll should be 40% higher right now. Fortunately the market is easily distracted and is sleeping on IR. So I'd buy your shares now.

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