Ecolab: Clean Gains & Sustainability
08/07/2017 2:56 am EST
I’m adding a 94-year-old company with a 31-year history of dividend growth to the Safe Income Tier of our model portfolio; the company is a leader in the rapidly growing field of sustainability, notes Chloe Jensen Lutts, income specialist and editor of Cabot Dividend Investor.
Ecolab (ECL) was founded in St. Paul, Minnesota in 1923. The company’s original product was a hotel carpet cleaner called Absorbit.
Now, 90 years later, Ecolab operates in 170 countries and still provides cleaning products and training to the hospitality industry. But the company has expanded broadly — largely through acquisitions — and now also serves companies in the food, healthcare, industrial and energy industries.
Most products are related to cleaning or water, and generally help customers be both more efficient and more environmentally friendly.
For example, Ecolab’s 3D TRASAR technology monitors the water conditions in industrial cooling systems—like those used in power plants—so they operate more efficiently and use less water.
In the food processing industry, Ecolab’s antimicrobial wash for fruits and vegetables reduces spoilage and food waste, while also preventing food-borne illnesses like E. coli and Salmonella.
But because Ecolab’s technologies are indispensable to those who use them and the company is the undisputed leader in the space, the vast majority of its revenues are recurring and cash flow is rock solid.
Over the past five years, free cash flow per share has increased every year by an average of 18% per year. EPS have increased by an average of 10% annually.
And Ecolab’s solutions are only becoming more popular as more companies make sustainability part of their corporate mandate.
Ecolab was a reliable investment well before sustainability became a buzzword. The company boasts an unbroken 31-year streak of dividend increases, earning the stock the title of “Dividend Aristocrat.”
ECL also earns a perfect 10 out of 10 for Dividend Safety, thanks to its strong dividend history and reasonable 34% payout ratio.
The stock scores highly on environmental, social and governance policies. Investors interested in slow-but-steady dividend growth, long-term gains and reliable income can do the same. As an aside, Cascade Investment, the investing vehicle for Bill Gates’ fortune, is one of Ecolab’s largest shareholders, with a 10%-plus stake.