Over the past decade, this dividend stock has delivered an annual total return of 5.70%.
At the same time the company has managed to increase earnings per share by 2.30% per year. In 2009, earnings per share declined by 36% due to weak revenues caused by the global recession. Analysts are estimating FY 2010 and FY 2011 EPS to increase to $3.05 and $3.60 respectively. The company derives over 57% of its revenues from international operations. In addition to that it is operating under eight segments: Industrial Packaging, Power Systems & Electronics, Transportation, Construction Products, Food Equipment, Decorative Surfaces, Polymers & Fluids and All Other.
Return on Equity has decreased from 19% in 2000 to 12% in 2009.
Dividends per share have increased by 14% annually over the past decade. A 14% increase in dividends translates into the dividend payment doubling every 5 years on average. Since 1989 the company has indeed managed to raise dividends every 5 years on average.
The dividend payout ratio has more than doubled over the past decade, from 24% in 2000 to 64% in 2009. This is a direct result of the fact that dividends have been increasing much faster than earnings over the past decade.
Currently Illinois Tool Works trades at a P/E of 14.40, yields 2.70% and has an adequately covered dividend payment based off next year’s earnings. I would add to my position there subject to availability of funds in my portfolio.
Full Disclosure: Long ITW
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