Pentair: A Dividend King’s Quiet Reign

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Old J.D. Rockefeller, a man who understood the vulgar necessities of wealth, claimed pleasure in the arrival of his dividends. A curiously limited ambition, one might think, but then, most fortunes are built on foundations of exquisite boredom. It is, after all, far easier to accumulate riches than to cultivate a soul.

ExxonMobil, a rather ostentatious offspring of Rockefeller’s dismantled empire, has dutifully increased its dividend for forty-three years. A predictable performance, naturally. The truly interesting companies are those that defy expectation, not confirm it.

There exists, you see, a small and exclusive club – the Dividend Kings. These are the companies that have raised their payouts annually for half a century or more. A remarkable feat, considering the economic tempests and the general absurdity of modern finance. As of late, only fifty-six have earned the title, a mere handful amidst the teeming masses of publicly traded entities.

The Newest Addition to the Court

Pentair, a purveyor of water solutions, has recently joined this select company, announcing an 8% dividend increase – its fiftieth consecutive rise. A perfectly respectable accomplishment, though one suspects the water itself is more interesting than its management. Investors have until January 23rd to partake in the next quarterly disbursement, before the shares, like so many illusions, drift beyond reach.

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However, let us not mistake longevity for invincibility. Even kings can fall, as Leggett & Platt demonstrated with a rather ignominious 89% dividend cut. Shares, predictably, suffered a decline. It proves, if proof were needed, that the market is governed by sentiment, not sense.

Can Pentair avoid such a fate, and emulate the enduring grace of Coca-Cola, which has continued to raise its payouts for thirteen years beyond its own half-century mark? The numbers, as always, offer a glimpse, though they rarely reveal the whole story.

A Closer Look at Pentair’s Reservoir of Potential

Pentair’s business, while lacking in glamour, is undeniably solid. It provides water removal services, pool maintenance, and filtration systems. A rather mundane existence, perhaps, but stability, my dear reader, is often found in the commonplace. Since the year 2000, the dividend has grown by a staggering 1,300%, while shares have returned a respectable 710%. A most pleasing performance, though one wonders if such growth can truly satisfy the insatiable appetite of the market.

Last quarter, adjusted earnings-per-share rose by 14%, more than justifying the recent dividend increase. The company also reported record cash flow of $719 million. A rather vulgar display of wealth, of course, but undeniably effective.

Furthermore, Pentair is actively repurchasing its own shares, having bought back $175 million in the first three quarters of the year. A sensible strategy, reducing the number of shares outstanding and, thus, increasing the value of those that remain. It is, after all, far easier to appear prosperous than to actually be so.

The payout ratio – the percentage of earnings used to cover the dividend – is a mere 25%. Management could, if it were so inclined, double the dividend overnight and still have half of its earnings left over. A most impressive feat of financial engineering, though one suspects they have more interesting ways to spend the money.

The dividend yield of 1.05% is slightly below the S&P 500 average of 1.14%. A minor quibble, considering Pentair’s 8% dividend hike significantly outpaced the S&P 500 average of 5.5%. Since 2021, Pentair has increased its dividend by 35%, outpacing inflation. Its fundamentals and shareholder-friendly management should allow it to mail increasingly more powerful checks to shareholders for years to come. This Dividend King won’t lose its crown anytime soon.

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2026-01-20 17:32