Top Dividend Growth Stocks: #14 Pool Corp

We are counting down to the number one Dividend Growth Stock. Coming in at #14 is Pool Corp (Pool). Pool Corporation distributes swimming pool supplies, equipment, complimentary lifestyle equipment, landscape irrigation, building materials, and related leisure products in the United States and internationally. The company operates 373 sales centers. Founded in 1993, Pool Corporation is headquartered in Covington, Louisiana.

Pool Corp (POOL) is Fully Certified, passing ALL Dividend System criteria. It has ‘Premier’ status being in the upper percentiles of this month’s stock universe. The company increased dividends for 16 years, making it a Dividend Contender 10+. We consider POOL to be a Growth stock.

GROWTH:  POOL’s 5-year average dividend growth rate is 19.8%, wonderfully high versus the dividend universe average of 12.4%. Free cash flow has grown at an average rate of 13.8% per year for the last 5 years versus the dividend universe at 8.3%, so POOL is performing very well.

INCOME: POOL’s current dividend yield is .63%, less than half of the average at 2.65%. Low yield is typical in high growth dividend stocks.

SAFETY: We use the Dividend Coverage Ratio to measure the dividend’s safety – higher is better. POOL has a DCR of 4.7 which is very good, more than double the minimum of 2. 

VALUATION: The price at time of analysis was $359.32, which we consider Overpriced. A fair price based on historical PE ratio and earnings would be around $224.56. The S&P500’s average PE ratio is 38.42, versus POOL’s PE ratio of 45.03,  well above the S&P 500 average PE. Our ‘Value Rating’ for Pool Corp is 1 out of 5.0, meaning that  both PS and PE indicate the stock is very expensive, compared to other dividend stocks available. Again, high growth stocks tend to be expensive.

TIMING: Historical Yield and PE tell us that POOL has ‘No ‘buy’ signal.’ Don’t eliminate a stock based on one factor (or lack thereof). 

QUALITY: Our quality formula gives POOL 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 Pool Corp a ‘A+.’

Will you dive into Pool, or sit on the deck sunning yourself? Would love to hear your thoughts!

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