The Board of leading industrial-gas company Air Products and Chemicals Inc. (APD) recently raised the company’s quarterly dividend to 64 cents per share from 58 cents, representing a 10.3% increase. This represents the 30th consecutive year of dividend increase by the Pennsylvania-based company.
The increase lifts the company’s annual dividend to $2.56 a share from the current payout of $2.32 and equates to a yield of roughly 2.8%. The revised dividend is payable on May 14, 2012, to shareholders of record as on April 2, 2012.
Air Products offers industrial gases as well as a variety of polymer and performance chemicals and serves technology, energy, industrial and health care customers globally. It is leading supplier of hydrogen and helium. Air Products conducts business in over 40 countries. The company faces stiff competition from Praxair Inc. (PX).
Air Products, in January 2012, reported its first-quarter 2012 results with earnings of $1.36 matching the Zacks Consensus Estimate. Revenues edged up 1% year over year to $2.4 billion, helped by higher prices across Merchant Gases and Performance Materials businesses. However, sales trailed the Zacks Consensus Estimate of $2.5 billion.
Management envisions accelerated growth across Asia and North America in second-half 2012. Better operating performance and new plant on-streams are expected to boost sales and earnings in the back half of 2012. The company noted, in its first quarter call, that its recent orders, healthy project backlog and solid bidding activity strongly position it to achieve its growth target for fiscal 2015.
Air Products benefits from a long-term take-or-pay contract, a consolidated industry structure, diverse customer base and sustained pricing power. However, soaring energy and raw material costs pose a threat to margin expansion. To compensate for escalating raw material costs, Air Products has been increasing the price for a range of chemicals it makes for industrial use.
We are currently Neutral on the stock, which is in line with a short-term Zacks #3 Rank (Hold).
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