The Stock (and Rising Dividend) That's Catching the Eye of Some Top Managers
Don Kilbride, manager of the $11.3 billion Vanguard Dividend Growth fund has compiled a stellar long-term record that outpaces the S&P 500 by focusing on firms with the commitment and balance sheet to increase their dividend payouts.
The managers of the $5.5 billion Sequoia fund have an equally impressive benchmark-beating long-term track record focusing on value plays that come with solid balance sheets.
Recently both funds have established new positions in the same stock: C.H. Robinson Worldwide (CHRW), a $9.2 billion third-party logistics firm that helps companies ‘round the globe better manage their supply chain and delivery systems.
Both funds added C.H. Robinson in the second quarter. The timing clearly smacks of buying on a significant dip.
Pretty ugly, eh? Well, C.H. Robinson Worldwide has clearly delivered the goods for long-term shareholders.
What’s hurting the company right now is the macro pressure of muted economic growth; shipping volume has been decent of late, but management notes that pricing pressure has hurt margins.
But unless you’re convinced the global economic slowdown is permanent, you’d recognize that once the macro picture improves that should spell better pricing leverage for C.H. Robinson.
Meanwhile, there’s a pristine balance sheet. The firm has no long-term debt and free cash-flow has grown over the long-term.
C.H. Robinson Worldwide has clearly delivered the dividend growth Kilbride demands for Vanguard Dividend Appreciation.
The rising payout ratio is something to keep an eye on. Such a rise during sluggish global economic growth makes sense, but at the point that there’s stronger growth you’d expect the upward trajectory in that ratio to flatten out.
And there is indeed an over-arching long-term growth argument for C.H. Robinson Worldwide. A recent research report from the Aberdeen Group noted that 88% of companies surveyed said they source products overseas and 85% said they are selling overseas. That’s a lot of shipping logistics to manage; every cost and timing edge that can be gained from optimized delivery drops to the bottom line. While big global firms have internal logistics operations, a growing trend is to fold in a third-party logistics firm like C.H. Robinson Worldwide to augment an increasingly complex shipping operational challenge.