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Ideas for Income Investors. High Dividend Stocks, Mutual Funds etc.
Donaldson's New Projects Will Drive Stock Higher
Posted by: Dividend King (IP Logged)
Date: April 23, 2012 10:20AM
Heads turn and brows wrinkle whenever a company decides to increase its share stock by offering to double the amount of shares each investor owns, mostly because people are not sure what to make of this type of move. This January, Donaldson (DCI), which sells filtration systems and parts, did exactly that, but that is not the end of the story. This company also doubled its dividend for shareholders on record as of February 17. Many investors are now asking themselves why it would do such a thing: Does it have so much liquid cash that it is giving the payouts its shareholders deserve, or is it afraid of impending doom but trying to keep investors happy by appearing profitable? Luckily for current Donaldson shareholders, my guess would be the former, based on the successes this company has been having across the board.
While competitors like Calgon Carbon (CCC) have been jumping up and down erratically, Donaldson has had a steadier rise. Recent months have seen a minor decline again, but I do not think that this is anything to be alarmed about. Instead, I would advise investors to take advantage of this dip to buy up shares before it swings up again.
Just last week, an oil company based in the Middle East and Saudi Aramco, decided to install Donaldson’s AW139 Inlet Barrier Filter systems on an entire helicopter fleet, in order to protect their aircraft from certain types of damage. Since a major Canadian aviation magazine has endorsed this purchase as a smart move that will reduce costs for Saudi Aramco, other major companies could follow suit, which will mean good things for the company and its shareholders.
Cummins (CMI) is also getting favorable reviews from the ARC Advisory Group. According to this report, Cummins has upgraded its manufacturing execution system (MES) in several plants around the world. It plans to implement this new system in ten more locations this year, with a total of 80 upgrades scheduled. This system improves overall operations and decreases employee turnover rate, according to ARC, which, if true, should help the company become better at supporting cost-effective measures in all its projects.
In North America, governments are unwittingly giving stocks like these a boost as well. In Canada, big trucks and other polluting vehicles will have to change their ways by 2018, according to new legislation. President Obama’s government unveiled similar laws last year to control emissions in the U.S., and this is a growing trend. For companies like Donaldson and Cummins, I think that this is good news, because companies affected directly by these laws will have to find new ways to reduce their pollution. Donaldson and Cummins provide these sorts of solutions.
Pall (PLL) also provides innovative engineering solutions, and this company’s newest addition to the management team, Ruby Chandy, has a quarter century of experience in leadership roles at top guns like Dow Chemical (DOW), Thermo Fisher Scientific (TMO), and others. Chandy will bring a fresh outlook and years of expertise into the fold, which should help Pall maintain its competitiveness for the long term. Since this company has not come up with any newsworthy ideas lately, new blood might be just the thing it needs to keep it going.
While China’s slowing economy is hurting stocks in other industries, I feel that Donaldson, Cummins, and even Pall have the know-how to implement projects in their home regions. For investors, this means that they should not have to worry about future prospects being unduly influenced by activities overseas, as far as I can tell, even as expansion remains a real possibility within this sector. The international state of affairs caused the U.S. stock market to plow through its lowest week of the year ending Friday, April 13. Donaldson and Cummins both took a small hit of just over 1%, but Pall actually moved up, albeit not significantly, finishing the week up 0.36%.
Another company that looks to me like it can manage to find ways to expand at home is Calgon Carbon, which recently signed a ten-year deal with the City of Phoenix, Az. The goal is to build a reactivation facility to reactivate activated carbon used for drinking water treatment in the area. In the meantime, Calgon Carbon has signed on Amiad Water Systems (AFSLF.PK) as its supplier of disc filtration for water treatment, so it appears to be checking out its options in terms of the most cost-effective and high-quality solutions.
This sector seems to be going strong, and I think investors should be considering it as an option. Donaldson in particular offers a lot of potential for the future, as I see it. It even officially recognizes the contributions of its employees with Annual Inventor Awards, which I feel can help enhance the positive atmosphere of the work environment. Good work relationships can assist the process of invention, the results of which will probably lead the company to bigger and better things.
Overall, Donaldson is definitely worth a buy-in. Pall is also worth considering, as is Cummins, although I would wait a bit for Cummins to drop back down. Judging by the trend and bearish attitudes, I expect it to do so in the near future in spite of its excellent work as a company, so investors should hold off just a while longer before getting into this stock. Meanwhile, the erratic Calgon Carbon should make a decent investment as well, if I am right. If nothing else, this stock has shown great stability over the last few years, so it is relatively low risk right now, and it has shown intelligent management in the past.
Stocks Discussed: DCI, CCC, CMI, PLL, DOW, TMO,
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