Dividend Aristocrats In Focus: C.H. Robinson Worldwide

Up to date on March twenty second, 2024 by Bob Ciura

Within the realm of dividend investing, the Dividend Aristocrats are the crème de la crème. The Dividend Aristocrats are a gaggle of shares within the S&P 500 Index with 25+ consecutive years of dividend will increase.

Attaining Dividend Aristocrat standing is a uncommon feat, with solely 68 corporations presently holding this distinction.

The Dividend Aristocrats checklist is extremely selective. With that in thoughts, we’ve put collectively a downloadable checklist of all 68 Dividend Aristocrats, containing essential metrics like dividend yields and price-to-earnings ratios.

You’ll be able to obtain a free copy of the Dividend Aristocrats checklist by clicking on the hyperlink under:

Disclaimer: Positive Dividend isn’t affiliated with S&P World in any approach. S&P World owns and maintains The Dividend Aristocrats Index. The knowledge on this article and downloadable spreadsheet relies on Positive Dividend’s personal evaluate, abstract, and evaluation of the S&P 500 Dividend Aristocrats ETF (NOBL) and different sources, and is supposed to assist particular person buyers higher perceive this ETF and the index upon which it’s primarily based. Not one of the data on this article or spreadsheet is official knowledge from S&P World. Seek the advice of S&P World for official data.

Whereas there are numerous choices for dividend shares, the Dividend Aristocrats are in a league of their very own. These corporations have a monitor file of being financially secure and producing constant money circulate, with the power to develop their earnings over time. This makes them resilient throughout financial downturns and in a position to persistently elevate their dividends annually.

C.H. Robinson Worldwide, Inc. (CHRW) is a latest addition to the Index. The corporate not too long ago introduced its twenty fifth consecutive annual dividend enhance and presently gives a yield of two.5%.

Regardless of the transportation business being somewhat cyclical, C.H. Robinson Worldwide’s mission-critical logistics options have allowed it to generate resilient outcomes through the years and thus afford constant dividend will increase. Due to this fact, C.H. Robinson may very well be a becoming inventory for income-oriented buyers.

Enterprise Overview

C.H. Robinson Worldwide is a transportation and logistics big that has been round because the early 1900s. Based by Charles Henry Robinson, the corporate has grown to develop into a Fortune 500 supplier of multimodal transportation companies and third-party logistics.

From freight transportation and transportation administration to brokerage and warehousing, CHRW gives a variety of companies to assist its shoppers transfer their items. Whether or not it’s by truckload, air freight, intermodal, or ocean transportation, the corporate has the experience to get the job carried out.

On January thirty first, 2024, C.H. Robinson Worldwide reported outcomes for the fourth quarter for Fiscal Yr 2023. Thecompany confronted challenges in This autumn 2023, evident by a 20.0% drop in gross earnings and a 34.5% decline in earnings from operations.

The complete-year image was equally tough, with a 27.9% lower in gross earnings and a notable 59.4% decline in earnings from operations. CEO Dave Bozeman acknowledged the impression of a poor demand and pricing atmosphere.

Regardless of the challenges, strategic measures corresponding to focusing on extra truckload quantity within the spot market led to sequential enhancements in total truckload revenue per load. Nevertheless, December noticed a decline because of increased seasonal transportation prices.

Bozeman highlighted achievements in productiveness, together with a 17% enhance in NAST shipments per particular person per day. Expressing confidence in overcoming challenges, the corporate goals to optimize structural prices and place itself for a freight market rebound.

This autumn 2023 financials revealed a 16.7% lower in complete revenues, a 20.0% drop in gross earnings, and a 34.5% decline in earnings from operations. A 55.3% efficient tax fee contributed to a 67.8% lower in web earnings and a 67.5% decline in diluted EPS.

Development Prospects

C.H. Robinson has grown income by 5.1% yearly over the previous 10 years. Earnings per share have elevated by 10.0% over the previous 5 years. We anticipate annual earnings development to be 4% for the subsequent 5 years with the newly bought Prime Distribution Companies’ assist.

C.H. Robinson provides nice worth to its prospects by its environment friendly Freight & Logistics brokerage companies, that are progressively capturing a bigger chunk of the underlying U.S. freight market. Actually, because the business has been shifting from asset-based trucking to brokers corresponding to C.H. Robinson, brokerage penetration over the previous 20 years has almost quadrupled.

One other development driver for the corporate contains its digital transformation, which ought to assist scale its operations additional. This contains C.H. Robinson offering significant merchandise, options, and insights to either side of the two-sided freight market, which interprets to distinctive data benefits for its prospects.

Lastly, C.H. Robinson ought to proceed to leverage its scale to capitalize on the rising freight market, increasing its distinctive international footprint. For fiscal 2024, we anticipate earnings-per-share of about $3.20, implying a small decline from 2023.

Aggressive Benefits & Recession Efficiency

The built-in Freight & Logistics could be cyclical, leading to fluctuating outcomes for corporations within the house because the demand for transportation can fluctuate primarily based on underlying financial situations. That mentioned, being the popular accomplice within the business, C.H. Robinson has managed to generate resilient outcomes over the many years.

With regards to competitors, C.H. Robinson is in a league of its personal. The corporate has constructed a community that’s second to none due to its effectivity and effectiveness. However what actually units it aside is the large barrier to entry that new or small rivals would face.

Constructing a community that may rival C.H. Robinson’s would take an enormous quantity of capital, and that’s one thing that not many corporations have. In different phrases, C.H. Robinson has a large financial moat that makes it laborious for others to compete with them. Because of this they’re thought of among the best within the business.

C.H. Robinson’s capability to proceed rising its earnings even below antagonistic financial situations was tremendously illustrated in the course of the Nice Monetary Disaster:

2007 earnings-per-share of $1.90
2008 earnings-per-share of $2.12 (11.8% decline)
2009 earnings-per-share of $2.15 (2.4% decline)
2010 earnings-per-share of $2.35 (9.4% enhance)

As a matter of truth, it has an unbroken streak of profitability courting again to 1996 and has by no means as soon as posted a loss in any quarter since. It is a exceptional achievement and a testomony to the robustness of its enterprise mannequin.

Valuation & Anticipated Returns

We anticipate that C.H. Robinson will earn $3.20 per share within the fiscal 12 months 2024. The inventory has a price-to-earnings ratio of 23.4. That is considerably above our honest worth P/E estimate of 15.0. A declining price-to-earnings ratio may cut back annual returns by -8.5% per 12 months over the subsequent 5 years.

As well as, C.H. Robinson has a dividend yield of three.3%, and the dividend payout seems to be well-covered by earnings. A breakdown of potential returns is as follows:

4.0% earnings-per-share development
3.3% dividend yield
-8.5% valuation tailwind

In complete, we consider C.H. Robinson may produce unfavourable annual returns of -1.2% over the subsequent 5 years.

Last Ideas

C.H. Robinson has managed to ship a wonderful monitor file of development, constant profitability, and rising dividends for a few years, however the firm is seeing declines coming off file outcomes in the course of the pandemic.

The inventory has a sexy dividend yield above 3%, and a protracted historical past of annual dividend will increase. That mentioned, dividend development is more likely to gradual, given the steep decline within the firm’s earnings.

As well as, shares appear to be considerably overvalued primarily based on the corporate’s diminished earnings energy. We forecast that C.H. Robinson inventory will generate unfavourable annual returns, making the inventory a promote in our view.

The next articles comprise shares with very lengthy dividend or company histories, ripe for choice for dividend development buyers: