Top Dividend Growth Stocks: #12 Nordson

We are counting down the top Dividend Growth Stocks — and after a two-day break we are back with #12, Nordson Corporation. Founded in 1935 and headquartered in Westlake, Ohio, Nordson (NDSN) makes systems to dispense, apply, and control adhesives, coatings, polymers, sealants, biomaterials, and other fluids worldwide. Additionally, they provide products and systems that support the manufacture of semiconductor and printed circuit boards. The company markets its products through direct sales force, as well as distributors and sales representatives.

Nordson (NDSN) is Fully Certified, passing ALL Dividend System criteria. The company increased dividends for 31 years, making it a Dividend Aristocrat 25+. We consider NDSN to be a Growth stock.

GROWTH:  NDSN’s 5-year average dividend growth rate is 11.7%, slightly below the dividend universe average of 12.4%. Free cash flow has grown at an average rate of 15.6% per year for the last 5 years versus the dividend universe at 8.3%, so NDSN is performing very well.

INCOME: NDSN’s current dividend yield is .82%, 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. NDSN has a DCR of 5.5 which is very good, more than double the minimum of 2. 

VALUATION: The price at time of analysis was $188.07, which we consider Overpriced. A fair price based on historical PE ratio and earnings would be around $89.46. The S&P500’s average PE ratio is 38.42, versus NDSN’s PE ratio of 44.04,  around from 1% to 25% over the S&P 500 average PE. Our ‘Value Rating’ for Nordson 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.

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

QUALITY: Our quality formula gives NDSN a ‘Quality Rating’ of 4.2 (out of 5), versus the average of 2.7 for this month’s dividend universe.

TOTAL RETURN: Over the last 15 years, the compound annual growth rate for an investment in Nordson Corp was 15.77% per year with dividends reinvested, versus the S&P500 Total Return of around 11% per year for the same time period. As you can see, NDSN is doing better than the market with dividends reinvested.

Compared to all dividend stocks paying 7 years or more of increasing dividends, we rate Nordson Corp a ‘B+.’

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