Up to date on February twentieth, 2025 by Felix Martinez
Roper Applied sciences (ROP) has elevated its dividend payout for 32 consecutive years, making it one of many Dividend Aristocrats.
The Dividend Aristocrats are a choose group of 69 shares within the S&P 500 which have had 25+ years of consecutive dividend will increase. We imagine they’re among the many greatest long-term investments within the inventory market.
You possibly can obtain a full listing of all Dividend Aristocrats (together with essential monetary metrics that matter) by clicking on the hyperlink under:
Disclaimer: Certain Dividend isn’t affiliated with S&P World in any manner. S&P World owns and maintains The Dividend Aristocrats Index. The data on this article and downloadable spreadsheet is predicated on Certain Dividend’s personal evaluation, abstract, and evaluation of the S&P 500 Dividend Aristocrats ETF (NOBL) and different sources, and is supposed to assist particular person buyers higher perceive this ETF and the index upon which it’s based mostly. Not one of the data on this article or spreadsheet is official knowledge from S&P World. Seek the advice of S&P World for official data.
To develop into a Dividend Aristocrat, an organization wants a robust enterprise mannequin, sturdy aggressive benefits, and the power to face up to world recessions.
The Dividend Aristocrats are high-quality dividend progress shares. Much more interesting is Roper’s excessive dividend progress fee. The newest improve was a ten% elevate.
Even among the many Dividend Aristocrats, dividend hikes of 10% are uncommon, which makes Roper’s dividend will increase over the past decade very spectacular. This text will talk about Roper’s enterprise, progress potential, and valuation.
Enterprise Overview
Roper designs and develops software program, together with each software-as-a-service and licensed expertise, and engineered merchandise and options. Roper has a various portfolio of services, which it offers to a mess of sectors, together with healthcare, transportation, meals, power, water, and training.
Roper focuses on three fundamental enterprise segments:
Utility Software program
Community Software program
Know-how Enabled Merchandise
Supply: Investor Presentation
The Utility Software program enterprise consists of Aderant, CBORD, CliniSys, Information Improvements, Deltek, Frontline, IntelliTrans, PowerPlan, Strata, and Vertafore as its fundamental merchandise.
The Community Software program enterprise consists of its fundamental merchandise: ConstructConnect, DAT, Foundry, iPipeline, iTradeNetwork, Loadlink Applied sciences, MHA, SHP, and SoftWriters.
Lastly, the Know-how Enabled Merchandise phase consists of CIVCO Medical Options, FMI, Inovonics, IPA, Neptune, Northern Digital, rf IDEAS, and Verathon as its fundamental merchandise.
Roper has broadly benefited from the regular enlargement of the U.S. economic system over the previous decade. We imagine the corporate can keep a optimistic progress trajectory for a few years going ahead.
Progress Prospects
Roper is uniquely positioned to generate robust progress throughout its enterprise, even when the broader U.S. economic system faces challenges equivalent to inflation and geopolitical danger.
On January thirtieth, 2024, Roper reported robust monetary outcomes, with This autumn income growing 16% to $1.88 billion and full-year income rising 14% to $7.04 billion. Progress was pushed by natural enlargement and strategic acquisitions. Working money move reached $2.39 billion, a 16% improve, whereas GAAP internet earnings grew 13% to $1.55 billion. Adjusted DEPS rose 10% to $18.31, reflecting continued profitability and effectivity.
Supply: Investor Presentation
Aggressive Benefits & Recession Efficiency
Over the previous a number of years, Roper pursued an asset-light enterprise mannequin, with a selected deal with software program and engineered services. The corporate adopted this technique to increase margins, by decreasing capital expenditure wants, whereas additionally producing recurring income.
This has resulted in a lot stronger money conversion over time and is prone to additional improve its money conversion ratio transferring ahead.
These components give Roper large aggressive benefits. Its excessive margins and operational effectivity present it with ample money move, which might be invested to remain forward of the competitors.
One other aggressive benefit that Roper has is that it’s extremely diversified throughout the expertise sector. It owns ~27 unbiased companies with management positions in area of interest markets. Moreover, these finish markets are fairly diversified and provide robust recurring income and buyer retention.
Buyers must also notice that previously, Roper was a cyclical enterprise. It had the capability for very robust progress when the economic system was increasing but additionally struggled throughout recessions. Earnings-per-share through the Nice Recession are proven under:
2007 earnings-per-share of $2.68
2008 earnings-per-share of $3.06 (15% improve)
2009 earnings-per-share of $2.58 (16% decline)
2010 earnings-per-share of $3.34 (29% improve)
As you may see, Roper was not a extremely recession-resistant firm. Earnings-per-share declined 16% in 2009. If the economic system have been to enter a recession within the years forward, Roper might see earnings decline.
Roper additionally has an amazing dividend progress document, numbering 32 years of consecutive dividend will increase. Over the previous decade, DPS has grown yearly by a mean of 14.1%.
We retain our DPS progress projection to 10%, which aligns with Roper’s newest improve and is definitely supported by the underlying internet earnings. We anticipate Roper to develop earnings-per-share at a fee of 10% yearly by 2030.
Valuation & Anticipated Returns
Roper is a high-quality firm with robust progress prospects, because of the excessive demand for its expertise. Subsequently, it shouldn’t be stunning that the inventory holds a premium valuation, as shares at present commerce for a price-to-earnings ratio of 29.2. Its P/E a number of is barely above its common valuation over the previous 10 years.
Since rates of interest have risen considerably over the previous 12 months, we’ve got a goal price-to-earnings ratio of 26. If shares have been to revert to this goal valuation inside 5 years, annual returns could be decreased by 2.5%. Potential overvaluation is a danger that buyers ought to take into account earlier than shopping for the inventory.
Nonetheless, this can be offset by earnings-per-share progress (anticipated at 10% per 12 months) plus the 0.6% dividend yield, leading to complete anticipated returns of 8.1% per 12 months. This can be a passable projected fee of return for a robust enterprise.
Remaining Ideas
Roper has a high-quality enterprise mannequin, and 10% annual earnings-per-share progress isn’t an unreasonable assumption transferring ahead.
The inventory can also be a Dividend Aristocrat, and because of the corporate’s excessive earnings progress fee, 10%+ annual dividend will increase are potential.
Roper matches the invoice of an awesome firm, however the inventory seems to be overvalued. Whereas the inventory might nonetheless generate stable returns for shareholders, it isn’t at present a purchase because it doesn’t exceed our 10% annual return threshold. Roper inventory is a maintain.
Moreover, the next Certain Dividend databases comprise probably the most dependable dividend growers in our funding universe:
In case you’re searching for shares with distinctive dividend traits, take into account the next Certain Dividend databases:
The most important home inventory market indices are one other stable useful resource for locating funding concepts. Certain Dividend compiles the next inventory market databases and updates them month-to-month:
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