One of the best long-term holds you’ll find if you go looking for hidden gems is Dover (NYSE:DOV).
Despite making few headlines and catching little attention on social media investment forums, Dover is a stock that has a great deal to offer for long-term investors.
Here’s what you need to know about Dover and the case for why it’s a stock to hold forever.
Dover is a multinational conglomerate engaged in the manufacturing of industrial goods. The company provides parts, finished goods and software for applications in a variety of different industries.
Dover’s segments include:
- clean energy,
- pump equipment,
- sustainability technologies and
- engineered products.
Why Is Dover a Great Stock to Buy and Hold?
Dover’s status as a solid buy-and-hold stock comes in large part from its incredible dividend history. The company is one of the dividend aristocrats, a group of S&P 500 stocks that have raised their dividends for a minimum of 25 consecutive years.
Over the last decade, Dover has averaged a payout ratio of over 35 percent. With this history attached to a well-established and highly diversified business, it’s almost certain that Dover won’t be cutting its dividends anytime soon.
At the time of this writing, Dover’s dividend yield stands at 1.29 percent for an annual payout of $2 per share. While this yield isn’t massive, it is highly reliable. If you’re looking for a low-risk source of income in your portfolio, shares of Dover are a safe option to consider.
In addition to its strengths as a dividend producer, Dover also has a long history of stable, steady growth. Over the last 10 years, the stock has returned an average of 16.44 percent annually. Combined with consistently rising dividends, this growth makes Dover a solid investment opportunity for those looking for good returns without exposing themselves to stocks that carry higher risk.
Together, this history of growth and a status as a dividend aristocrat suggest that Dover is a stock that can be bought and held almost indefinitely. The company has been around since 1955 and clearly isn’t going anywhere soon. If you’re looking for a stock that can grow steadily over long periods of time, Dover is well worth consideration.
Dover Earnings and Revenue
Of course, dividends aren’t the only thing to like about Dover.
In Q4, Dover turned in a significant earnings beat, outperforming the consensus estimate of $1.66 per share with a real performance of $1.78 per share. This made for the second consecutive quarter in which Dover beat the consensus estimate by more than 7 percent.
Q4 revenues were also better than expected. The company reported $1.99 billion in revenue, up from $1.78 billion in Q4 2020. This amounted to a revenue beat of 4.33 percent against the consensus estimate. While not as outstanding as the earnings beat, this still shows that Dover is turning in very strong performance.
Dover Valuation and Cash Flow Metrics
Despite its obviously favorable performance in Q4, Dover stock is down 14.96 percent YTD. This loss has made Dover a bit more attractive from a valuation perspective.
The company’s P/E ratio is 18.03, and its price-to-cash-flow ratio stands at 15.89. Both of these metrics are roughly in line with its industry, suggesting that Dover is fairly valued at the moment.
The one ratio that is somewhat concerning in terms of valuation is the company’s price-to-book ratio of 5.31. This is nearly double the industry average of 2.75. However, when taking into account the other valuation metrics and the fact that Dover is an extremely well-established company, a high price-to-book doesn’t raise too many red flags.
Dover also does quite well in terms of profitability and cash flow. Trailing 12-month operating margin stands at 16.58 percent with a profit margin of 14.21 percent.
Operating cash flow was $1.12 billion, and levered free cash flow came in at $744.3 million for the same period. In addition, Dover is currently sitting on a decent amount of cash, having a stockpile of $385.5 million.
Dover Price Targets
In addition to its strengths as a dividend producer, Dover also appears to have considerable upside over the next 12 months.
The current median Dover analyst price target is $190, up by 23.1 percent against the most recent price of $154.38. For investors who buy now, this makes Dover an attractive option from both a share price and dividend perspective.
Should You Buy Dover Now?
Taking all of this into account, Dover appears to be a good buy at the moment. While the company has taken some losses so far this year, it’s unlikely that such a historically strong business is in serious danger. These price fluctuations are most likely temporary and related to broader market volatility, rather than a sign that Dover is in long-term trouble.
Based on its dividend history, Dover is a great stock to buy while the prices are somewhat low and hold for the long run as an income producer. The company isn’t likely to lose its dividend aristocrat status anytime soon, and you can reasonably count on this stock to continue its track record of raising its dividends.
In addition, Dover appears to be in a strong position to produce good returns in terms of share price over the coming 12 months. With a potential upside of more than 20 percent, an investment made in Dover today could be an excellent growth addition to your portfolio.
In spite of the declining share price in the early months of this year, all of Dover’s metrics appear to be quite solid. The company has turned in good performance in terms of both revenue and earnings, and its balance sheets don’t present any cause for alarm. Most crucially, it also has ample cash flow to maintain and raise its dividend.
Overall, Dover looks like a good buy for most investors. Conservative investors will appreciate the company’s strong foundations, fair valuation and promise as a dividend producer.
Investors seeking higher growth, on the other hand, will find the 12-month price targets quite appealing in this volatile market. While this company may not make headlines in the finance world, Dover is clearly a stock that can play a number of different roles in a diversified portfolio.
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