Dividend kings, companies with 50+ consecutive years of dividend growth under their belts, tend to be large, stable, and well-known businesses that are often a favorite among income investors.
However, occasionally small, lesser-known companies make it into this venerable group.
ABM Industries (NYSE:ABM) is one example and has been a remarkably stable business over the decades.
The company’s management team is pursuing ABM’s largest ever corporate restructuring effort to further enhance the firm’s competitive position, too.
While ABM’s current dividend yield is below the yields offered by companies on our best high dividend stocks list here, ABM’s dividend growth profile could be set to improve with management’s restructuring plan.
Let’s take a closer look at this dividend king to see if it could be a good bet for long-term dividend growth investors.
Founded in 1909 in New York City, ABM Industries’ 100,000 employees serve over 20,000 corporate clients, both big and small, across over 300 offices in the US and in 20 international markets.
Essentially, ABM is a kind of corporate “handy man,” providing integrated solutions to a variety of logistical and mechanical engineering needs including energy solutions, HVAC (air conditioning), electrical systems, lighting, general maintenance and repair, as well as lawn care, janitorial, and parking services.
The company is currently undergoing its largest ever corporate restructuring that will result in six main business units which collectively represent $38 billion to $48 billion in global annual sales potential.
A key factor to becoming a dividend king is a stable business model, as well as steady growth in sales, earnings, and free cash flow.
As you can see below, ABM Industries has a solid track record of steady top line growth, mainly due to large scale acquisitions in this highly fragmented industry.
However, the company has struggled somewhat to convert that acquisitive growth into higher returns.
In fact, while ABM’s adjusted EBITDA margin (management’s preferred profitability metric) has been flat over the past few years, its overall profitability and returns on shareholder capital have been headed in the wrong direction.
Companies that maintain a return on invested capital in the mid-single digits typically have few competitive advantages.
In ABM’s case, it has larger size…