We are counting down the Top Twenty dividend growth stocks. At number 20 is Ametek. AME makes electronic instruments and electromechanical devices for aerospace, power, oil and gas, pharmaceutical, semiconductor, laboratories, and food and beverage industries. They provide a network of aviation maintenance, repair, and overhaul facilities, clinical and education communication solutions for healthcare facilities and educational institutions. Incorporated in 1930, AME is headquartered in Berwyn, Pennsylvania.
AMETEK Inc (AME) is ‘First Class,’ failing only 1 of 5 Dividend System criteria. It has ‘Premier’ status being in the upper percentiles of this month’s stock universe. The company increased dividends for 27 years, making it a Dividend Aristocrat 25+. We consider AME to be a Growth stock.
GROWTH: AME’s 5-year average dividend growth rate is 12%, slightly below the dividend universe average of 12.4%. Free cash flow has grown at an average rate of 11.4% per year for the last 5 years versus the dividend universe at 8.3%, so AME is doing nicely.
INCOME: AME’s current dividend yield is .61%, less than half of the average at 2.65%.
SAFETY: We use the Dividend Coverage Ratio to measure the dividend’s safety – higher is better. AME has a DCR of 7.5 which is excellent, well above the minimum of 2.
VALUATION: The price at time of analysis was $117, which we consider Overpriced. A fair price based on historical PE ratio and earnings would be around $84.56. The S&P500’s average PE ratio is 38.42, versus AME’s PE ratio of 31.05, below the S&P 500 average PE, indicating some value, as compared to our dividend universe. Our ‘Value Rating’ for AMETEK Inc is 1 out of 5.0, meaning that both PS and PE indicate the stock is very expensive, compared to other dividend stocks available.
TIMING: Historical Yield and PE tell us that AME has ‘No ‘buy’ signal.’ Don’t eliminate a stock based on one factor (or lack thereof).
QUALITY: Our quality formula gives AME a ‘Quality Rating’ of 4.1 (out of 5), versus the average of 2.7 for this month’s dividend universe.
Compared to all dividend stocks paying 7 years or more of increasing dividends, we rate AMETEK Inc a ‘B+.’
What do you think of our analysis and summary? Let us know in the comments