Dividend Aristocrat Overview: Pentair

About Pentair

Pentair Dividend Growth

Pentair designs, manufactures and services products like this water filtration system worldwide.
Photo from Pentair subsidiary X-Flow product website.

Pentair PLC is a diversified industrial manufacturer focused on the water, food and energy industries with 30,000 employees. The company, with global corporate offices in Manchester, UK and U. S. headquarters in Minneapolis, MN, provides products, services and solutions for water and fluid management, thermal management and equipment protection.

Pentair Inc. was largely a power tools business until 2004 when the company sold that business line to another S&P 500 Dividend Aristocrat, Black & Decker. Pentair then reinvented itself as a fluid processing company by buying several liquid processing firms, including Wisconsin water technologies company WICOR.

In September 2012, Pentair Inc. and Tyco International Ltd. combined Tyco’s Flow Control International Ltd. (also known as Tyco Flow Control) with Pentair in an all-stock merger. Prior to the merger, Pentair Inc. was involved in water treatment, beverage filtration systems and thermal management. The new company, named Pentair Ltd., was twice the size of Pentair Inc. and now also supplied industrial valves and fluid control systems to the energy industry – refineries, electric companies and drilling firms. The new company joined the S&P 500 and became a Dividend Aristocrat when the merger was finalized on September 28, 2012.

Pentair has four business segments: (1) Valves & Controls, (2) Process Technologies, (3) Flow Technologies, and (4) Technical Solutions.

The Valves & Controls segment designs, manufactures, markets and services valves, fittings, controls, and actuators for the energy and industrial markets. The segment contributed 33% of total sales in 2013, with the majority of sales coming from the energy industry. This segment was most affected by the merger, with net sales up 350% from 2012 to 2013 to $2.47 billion and operating income shifting to a profit of $161.4 million.

The Process Technologies segment designs, manufactures, markets and services water system products for filtration, separation, and fluid process management work in the food and beverage, water, wastewater, and aquaculture applications. More than half of the segments sales come from residential and commercial applications, with another quarter from the food and beverage industry. Net sales (23% of total company sales) were up by 16% to $1.76 billion in 2013 and operating income was up by over 83% to $243.2 million.

The Flow Technologies segment, which provided 22% of total company sales in 2013, designs, manufactures and markets products and services designed for the transfer and flow of clean water and purification of wastewater. Net sales were up by 42% in 2013 to $1.62 billion and operating income was nearly $150 million.

Finally, the Technical Solutions segment (which, like the Flow Technologies segment, also provided 22% of total company sales in 2013) designs, manufactures, markets and services products that protect sensitive electronics and electronic equipment, and also provides thermal management solutions for temperature sensitive fluid applications. Segment sales were up 34.5% in 2013 to $1.66 billion and operating income was up over 70% to $285 million.

With the merger in late 2012, sales and income comparisons between 2012 and 2013 difficult, but Pentair did swing from a loss of $107 million in 2012 to a profit of $536.8 million in 2013. Sales were up nearly 70% to $7.5 billion in 2013.

The company is a member of the S&P 500 index and trades under the ticker symbol PNR.

Pentair’s Dividend and Stock Split History

Pentair Dividend Growth

Pentair has compounded its dividend at a rate of 10% over the last decade.

Pentair has paid dividends since 1964 and started increasing dividends in 1977. The company met the Dividend Aristocrat criteria of 25 consecutive years of increasing regular dividend payments in 2001. The company has traditionally announced its annual dividend increase in December with the exception of 2013 and 2014 when Pentair announced the increase in April and the stock went ex-dividend in July. In April 2014, Pentair announced 30 cent per share dividends for the 3rd and 4th quarters of 2014 and the 1st and 2nd quarters of 2015, which was a 20% increase over the prior rate of 25 cents per share. In December 2014, Pentair announced that they were increasing the quarterly dividend again, this time by 2 cents – or 6.7% – per share. It’s unclear when Pentair will announce its next dividend increase, but it will likely be in either April or December 2015.

Pentair has usually grown its annual dividend in the single digit percentages, with occasional increases in the low double digits. Pentair’s 5-year compounded annual dividend growth rate (CADGR) is 8.85%, while over the last decade Pentair has compounded the dividend at an annual rate of 10.11%. Since meeting the Dividend Aristocrat criteria in 2001, Pentair’s dividend has grown at a compounded rate of 9.21% – a rate that doubles the dividend every 8 years.

Pentair stock began trading on the NYSE on March 4, 1996 and since then has split once – a 2-for-1 split in June 2004.

Your investment in Pentair from mid-2009 to mid-2014 would have grown from about $21.51 to about $70.22 – a compounded rate of 26.7% over that time, not including the effects of reinvested dividends. This nearly doubled the 14.3% annual compounded return of the S&P 500 over that same period.

Pentair’s Direct Purchase and Dividend Reinvestment Plans

Pentair has both direct purchase and dividend reinvestment plans. Investors interested in participating in either of these plans can find information at ComputerShare’s Investment Center website. The dividend reinvestment plan allows you to reinvest dividends in full or in part; you can also choose to have the dividends directly deposited into your checking account.

From the perspective of an individual investor, Pentair makes the plans very attractive. The company pays all fees associated with buying shares, both directly and through dividend reinvestment. Pentair also pays the setup fee for new investors.

The minimum investment is $25 for all direct investments, either by check or by automatic debit.

When selling your shares in the plan, you’ll pay 12 cents per share sold plus a transaction fee of between $15 and $25, depending on the type of sell order (batch, market or day limit order). If you enter your order through a customer representative versus online, you’ll pay an additional fee of $15.

Helpful Links

Pentair’s Investor Relations Website

Current quote and financial summary for Pentair (finviz.com)

Information on the direct purchase and dividend reinvestment plans for PNR

Want to find out about more great dividend growth stocks?

Check out the list of current S&P Dividend Aristocrats.

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