Dividend Growth Stock Overview: Lincoln Electric Holdings

Photo: Freeimages.com/guru_1234.

About Lincoln Electric Holdings

Lincoln Electric Holdings is a worldwide broad line manufacturer of welding, cutting and brazing products. The company manufactures these industrial products in a range of sizes, from light manufacturing to high volume robotic operations, to support a variety of industries. These industries include shipbuilding, automotive manufacturing, pipe mills, structural steel construction, and heavy equipment fabrication. The company employs 10,000 people worldwide and has its headquarters in Cleveland, Ohio.

The history of Lincoln Electric Holdings dates back to 1895 when The Lincoln Electric Company was incorporated in Ohio. In 1998, the company was restructured to create Lincoln Electric Holdings, with the original Lincoln Electric Company as one of its subsidiaries. The company was listed on the NASDAQ in June 1995; prior to that, it was traded on the OTC markets.

The company has manufacturing facilities around the world and divides its operations into 5 operating segments, with 4 of them based on the geographical distribution of the company’s welding manufacturing operations. The four geographically based segments are: (1) North American Welding, which covers welding operations in the U.S., Canada and Mexico and provided over 60% of Lincoln Electric’s total sales in 2014; (2) Europe Welding, which includes Russia, Africa and the Middle East, and provided 15% of total company sales; (3) Asia Pacific Welding, covering China and Australia, and which provided about 9% of total company sales; and (4) South American Welding, which covered operations in Brazil, Columbia and Venezuela, and provided 5% of total company sales. The 5th segment, The Harris Products Group, is responsible for the brazing, soldering and cutting operations worldwide and retail business in the U.S. The Harris Products Group provided the remaining 11% of total company sales in 2014.

In 2014, Lincoln Electric Holdings generated net income of $254.7 million on sales of $2.8 billion. Net income was down 13.3% from 2013 and sales were down 1.4%. Earnings per share were $3.18, down 10.2% year-over-year. Based on the current annualized dividend of $1.16, the company has a payout ratio of 36.5%.

Lincoln Electric’s operations are correlated to the worldwide economic situation. In addition, as a worldwide manufacturer the strong dollar impacts Lincoln Electric earnings; diluted earnings were reduced by 10 cents per share and sales were reduced by 2.6% due to currency effects. Sales and earnings were also impacted by a drop in sales volume in the Asia Pacific segment and, more significantly, by the economic situation in Venezuela. The company’s operations were disrupted due to the lack of available raw materials in Venezuela and the high rate of inflation. While inflationary effects were mitigated by price increases, the government devalued the Bolivar multiple times in 2014. The company also needs to wait for approval from the Government of Venezuela to convert Bolivars to U.S. Dollar, which also impacts the company’s operations. Lincoln Electric’s Venezuelan operations reduced total earnings by 10 cents a share in 2014.

The company has an active share repurchase program – in July 2013, Lincoln Electric authorized the purchase of 45 million shares. As of December 31, 2014, 33.7 million shares had been repurchased, including 4.4 million in 2014. This leaves 11.3 million shares in the program, representing 15.1% of the outstanding shares.

The company is a member of the S&P Mid Cap 400 index and trades under the ticker symbol LECO.

Lincoln Electric’s Dividend and Stock Split History

Lincoln Electric Dividend Growth

Lincoln Electric has rewarded investors with a dividend growth rate of more than 12% over the last 5 years.

Lincoln Electric Holdings has paid dividends annually since 1915 and has increased them since 1995. Lincoln Electric generally announces dividend increases at the end of October, with the stock going ex-dividend at the end of December. In October 2014, Lincoln Electric announced a 26.1% dividend increase to an annualized rate of $1.16. Lincoln Electric should announce its 22nd year of dividend growth in October 2015.

The company alternates between periods of fast dividend growth and periods of reduced dividend growth. Since 2011, Lincoln Electric has rewarded investors with double-digit growth. The company’s 5-year dividend growth rate is 12.45%, while its 10-year and 20-year dividend growth rates are 11.00% and 12.68%, respectively.

Since beginning its record of dividend growth, the company has split its stock 3 times, with 2-for-1 splits in June 1995, June 1998 and June 2011. Each share of stock purchased when Lincoln Electric began raising its dividend annually would have split into 8 shares.

Lincoln Electric history of stock splits pre-dates its dividend growth history, with 10-for-1 splits in 1919, 1930 and 1993, and a 5-for-1 split in 1965.

Over the 5 years ending on December 31, 2014, Lincoln Electric stock appreciated at an annualized rate of 22.91%, from a split-adjusted $24.27 to $68.09. This dramatically outperformed both the 13.0% annualized return of the S&P 500 index and the 15.9% annualized return of the S&P Mid Cap 400 index over the same period.

Lincoln Electric’s Direct Purchase and Dividend Reinvestment Plans

Lincoln Electric has both direct purchase and dividend reinvestment plans. You must already be an investor in Lincoln Electric to participate in the plans; if you own the stock in your brokerage account, you’ll have to have them transferred into your name in order to join the plans. The minimum amount for additional direct purchases is $10 and the monthly maximum is $1,000. The dividend reinvestment plan allows for partial reinvestment of dividends.

The direct purchase plan is extremely favorable to investors, as Lincoln Electric covers all the transaction and per share fees for additional direct purchases and dividend reinvestments. Like most DRIP plans, there are fees when you go to sell your stock in the plan. You’ll pay a transaction fee of between $15 and $30 depending on the type of sell order that you request, along with a commission of 10 cents per share. You will also pay an additional fee of $5 to have the proceeds directly deposited into your account.

Helpful Links

Lincoln Electric Holdings’ Investor Relations Website

Current quote and financial summary for Lincoln Electric Holdings (finviz.com)

Information on the direct purchase and dividend reinvestment plans for Lincoln Electric Holdings

Share this post:

Recent Posts

Comments are closed.