It’s likely to remain a low-risk dividend stock for the foreseeable future.
The company’s dividend yield sits just above 5%, its highest level in nearly 30 years. And its dividend continues to look secure thanks to its strong balance sheet. But the company’s high spending on growth projects, coupled with today’s challenging energy market, will likely put more pressure on the firm’s cash flow in the short to medium term.
The company enjoys an asset-light model which generates consistent free cash flow, holds profits fairly steady during industry downturns thanks to its variable cost structure, and earns solid returns on invested capital. When combined with management’s conservative capital allocation and the essential logistics services it provides, the company has been able to reward shareholders with higher dividends each year since it went public in 1997.
It’s a simple, boring business, and its time-tested operation, well-known brand, economies of scale, defensive profile, and dependable cash flow generation make it a reliable dividend aristocrat. All things considered, it seems likely to remain an appealing long-term investment for conservative investors seeking sources of safe dividend income.
Warren Buffett’s Berkshire Hathaway and Bill Gates’ Foundation Trust both own stakes in the company, so it’s no surprise that it appears to have several enduring competitive advantages. The company’s global scale, hard-to-replicate global transportation network, and continued investments in efficiency initiatives seem likely to keep it at the top of its industry and paying safe, growing dividends for many years to come.