We are counting down the Top Dividend Growth Stocks. Coming in at number 17 is Heico. HEICO Corporation is an aerospace and electronics company that creates products for aircraft, spacecraft, defense equipment, medical equipment, and telecommunications systems.
Heico Corp (HEI) 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 19 years, making it a Dividend Contender 10+. We consider HEI to be a Growth stock.
GROWTH: HEI’s 5-year average dividend growth rate is 18%, wonderfully high the dividend universe average of 12.4%. Free cash flow has grown at an average rate of 15.4% per year for the last 5 years versus the dividend universe at 8.3%, so HEI is performing very well.
INCOME: HEI’s current dividend yield is .12%, 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. HEI has a DCR of 21.3 which is excellent, well above the minimum of 2.
VALUATION: The price at time of analysis was $128.97, which we consider Overpriced. A fair price based on historical PE ratio and earnings would be around $58.78. The S&P500’s average PE ratio is 38.42, versus HEI’s PE ratio of 49.4, 25% or higher than the S&P 500 average PE. Our ‘Value Rating’ for Heico Corp is .5 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 HEI has ‘No ‘buy’ signal.’ Don’t eliminate a stock based on one factor (or lack thereof).
QUALITY: Our quality formula gives HEI a ‘Quality Rating’ of 4.2 (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 Heico Corp a ‘A-.’
Will you be adding HEI to your portfolio? Let us know your thoughts please.