I target three things in my monthly newsletter: massive economic and financial trends, stocks that have a “moat” or advantage over competitors and especially, stocks that are dividend raisers, notes Sean Brodrick, editor of Wealth Megatrends.
History shows that dividend raisers generally outperform those that don’t raise dividends. And it’s just easier to invest with a megatrend on your side. Kronos Worldwide (KRO) checks all these boxes.
The company supplies titanium dioxide (also known as “titania” and by its chemical symbol, TiO2) to chemical coating companies. Hold up — what’s titanium dioxide? Well, it has the highest refractive index of any material known to man.
The refractive index is how much a material stops light. TiO2 is one of the whitest materials on Earth. And, when ground into a fine powder, tritanium dioxide transforms into a pigment that provides maximum whiteness and opacity. Titanium dioxide pigments are used in paints and coatings, plastics, paper, building materials, cosmetics, pharmaceuticals, foods and many other commercial products.
So, TiO2 coatings have strong industrial applications for improving the efficiency of concrete, ceramics, floor coverings, roofing materials, etc. That means Kronos Worldwide stands to reap rewards from this increase in infrastructure investment.
Here’s a fun fact: 70% of the world’s titanium dioxide is controlled by seven companies, and Kronos is one of them. Recently, there seems to be a quiet “gentlemen’s agreement” among the big seven to focus on value and margin stabilization.
Newfound pricing discipline will help Kronos and the others balance volume and prices to maximize cash flow. So, while Kronos may not “own the moat,” it’s on the right side of the moat.
President Biden has also consistently called for the expansion of renewable energy technology, and the renewables megatrend is still in its early stages. Titanium dioxide coatings pair well with renewable energy infrastructure because they make renewables cheaper to produce, remove pollution and reduce waste.
Titanium dioxide lowers the cost of generating solar energy via dye-sensitized solar cells. Heck, it has a million uses. In fact, Mexico uses titanium oxide coatings for the front of its hospitals to cut down air pollution.
Kronos Worldwide is also a reliable dividend payer, recently yielding 4.8%. It next goes ex-dividend at the beginning of March. What’s more, that dividend is projected to rise 1.8% per year for the next three years.
Kronos saw its earnings decline in 2020 (thanks, pandemic), but things are turning around in a hurry. Kronos’ earnings per share grew 345% in the third quarter compared to a year earlier and are projected to grow 166% in the fourth quarter.
Driving this is a resurgent economy. Looking forward, Goldman Sachs expects 2022 GDP growth of 3.8%. Bank of America is projecting 4%. Other big firms are in this same area. And while nobody has a crystal ball, that’s a darned good environment for economic growth and corporate profit growth. Add in higher government spending and this is a great time to invest in Kronos.