Dover Corporation

Diversified industrial conglomerate

Have you ever heard of the Dover Corporation? If not, you're in the same boat as me. And yet it's exactly these kinds of boring stocks, the ones you rarely read anything about, that I usually find highly interesting. I came across the Dover Corporation when I was, as so often, browsing my favorite stock screener, Aktienfinder. I simply filtered for the companies with the longest dividend growth streaks. American States Water, which I've also written about already, is in 1st place with an incredible 65 years, closely followed by the Dover Corporation. The dividend has been paid for 64 years and even raised every year. For me, that's a very clear mark of quality. Not many companies have managed to keep up such a great streak even during economic downturns.

But what exactly does the Dover Corporation do, and how does it manage to raise its dividend with such remarkable consistency? Let's take a closer look at the conglomerate today ...

The origins and business model of Dover Corp.

Charles Lee Cook was born in 1870. At just one year old, his muscle growth stalled and he was diagnosed with polio. Charles spent his entire life in a wheelchair. Because his parents thought he didn't have long to live, they ended his schooling before he turned 7. Little Charles then spent a lot of time in his father's workshop and found a new hobby in building steam engines. He developed an extraordinary talent that enabled him, at just 8 years old, to assemble a fully functional steam engine from 1000 different scrap metal parts. While watching a locomotive at the local train station, Charles noticed a leak in the steam chamber. Over the following days, he promptly developed a sealing ring that solved the problem. Because his product worked so well, he bought his own lathe, built a 4-horsepower steam engine and was thus able to make sealing rings faster and more efficiently. When you consider that he only had limited use of his right arm and hand, you quickly realize what ambition the little inventor showed. By the age of 17 he had saved enough money to move from the family workshop into his own small factory. The Cook Manufacturing Company was born.

Even though his work was outstanding and innovative, Cook often struggled with his lack of schooling. Once, when colleagues and business partners made fun of his grammar and use of language during a speech, he began studying the English language intensively. In no time at all he acquired an enormous amount of knowledge, for which he was admired everywhere. His company was doing great as well. Especially during World War I, his products were installed in practically every ship of the US fleet. In 1920 Cook became known throughout America when B.C. Forbes wrote about him in his magazine. The article was about how hard work and the will to learn inevitably lead to success - regardless of whether or not you have a physical disability.

When Cook died at the age of 57, Fred Durham took over the company. Durham, a trained metallurgist, had joined the company in 1923 to develop a durable metal composite. However, in the 1930s the company was sold to the New York stockbroker George Ohrstrom. In addition to the C. Lee Cook Company, Ohrstrom also bought Rotary Lift, a maker of automotive lifts, W. C. Norris, which made sucker rods for oil well pumps, and Peerless, a maker of space heaters. Ohrstrom quickly realized that he couldn't run these companies himself, so he brought in Durham for support, who was to lead the newly formed conglomerate Dover Corporation. Over the years the company broadened its footprint more and more. Today it's mainly active in the following 5 business segments: Engineered Products (innovative components and systems), Fueling Solutions (fueling equipment), Imaging & Identification (specialized equipment for marking work), Pumps & Process Solutions (solutions for the safe handling of various fluids) and Refrigeration & Food Equipment (energy-efficient equipment for cooling and heating food).

What's next for the Dover Corporation?

Well, unfortunately I couldn't find out exactly what awaits us at the Dover Corporation over the next few years. But some things are beyond question: the company will always try to identify suitable and attractive takeover candidates and then buy them. And since Dover's management has always given its subsidiaries a lot of freedom, it can easily make acquisitions without creating too much work for itself. In January of this year alone, it bought two companies. Systech International, a leading provider of serialization, traceability and anti-counterfeiting solutions. As well as the company Soft-Pak Software Solutions, which specializes in developing software solutions for waste and recycling fleets. A possible customer here could be Waste Management, for example.

The Dover Corporation, much like 3M Company or Illinois Tool Works, is a conglomerate. Of course, the company benefits from its broad diversification in times of crisis, since it isn't so dependent on individual business units. Nevertheless, Dover's executives noticed that their growth rates had declined compared to the competitors mentioned above. Naturally they reacted in good time and therefore launched a restructuring plan in early 2018 that was meant to make the conglomerate more efficient and profitable. The first successes were already showing in 2019. If you take a look at the stock chart, you quickly see that investors were very happy with this development too. From December 2018 to today alone, the share price rose by a proud 80 percent. Mind you, that's without counting dividends.

Speaking of dividends. Can the dividend keep growing?

Of course I don't have a crystal ball, but I'd be extremely surprised if the Dover Corporation suddenly stopped raising its dividend. With a current payout ratio of 42%, there's still room to grow. By the way, shareholders have been receiving a dividend since 1947, and it has been raised every year since 1955. At 1.63%, the current dividend yield isn't particularly high, but that's also due to the strong rise in the share price. Over the last 10 years, the Dividend King raised its dividend by an average of 6.7%/year. In my opinion, that's an area where it could pick up the pace a bit again.

Conclusion:
The Dover Corporation is a superbly organized and broadly diversified conglomerate made up of a wide range of industrial companies. It's mainly active in the chemicals, environmental, oil and gas, fueling and consumer goods markets, which leaves it well equipped for a crisis. Especially investors looking for a stable yet growing dividend stock for their portfolio should take a closer look at the Dover Corporation.