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Dividend Investing Stocks (Archived)

ROP - Roper Technologies, Inc.

Dividend investing is a popular strategy with investors seeking an income stream. Dividend investors can be placed into two broad categories.

  1. The growth approach - buy dividend paying stocks with emphasis on the company's ability to grow and increase its future dividend payments (to maximize the future yield).
  2. The yield approach - buy dividend paying stocks at cheap prices (to maximize the current yield).

Dividend investors using the growth approach tend to look for the same basic growth characteristics as found with growth investing, but the stock must also pay a reasonably reliable dividend.

Dividend investors using the yield approach tend to be more concerned with the stock price and the companies ability and willingness to pay a regular dividend rather than its ability to expand.

Sometimes a company will satisfy the requirements for both approaches.

In the July 2015 issue a fundamental analysis is conducted on a selected sample of stocks. The analysis is based on fundamental data from one year ago. This allows financial students and investors to see how the stock price performed over the next 12 months after the hypothetical purchase.

Roper Technologies, Inc.

Roper Technologies, Inc. NYSE:ROP is a large-cap electronic equipment company and its stock trades around $57 million per day. ROP was founded in 1981 and has an established history of paying dividends.

The key fundamentals for ROP are shown below.

Growth fundamentals for ROP

YearRevenueEPS ROEDividendBook ValueEmployees
20049601.10 8%0.2013.105600
200514501.75 12%0.2214.506000
200617002.20 13%0.2416.906900
200721002.82 14%0.2720.207100
200823003.19 14%0.3022.307900
200920402.50 10%0.3425.307650
201023803.35 12%0.4028.908050
201127904.41 13%0.4733.008570
201229904.90 13%0.5837.409470
201332305.43 13%0.7042.309910

The fundamental data above shows that ROP has broadly increased its revenue, earnings, book value and employees over the last decade. These are the characteristics of an expanding company which indicates that ROP is a growth stock that pays a regular dividend. Also the annual dividends have increased considerably over the last decade.

Fundamental Analysis for ROP:

The return on equity is reasonable at around 12%. The profit margin (profit to revenue ratio) has been generally increasing over the last decade and is currently around 15%.

The current ratio (current assets to current liabilities) ranges from 1.5 to 2.2 which indicates that ROP has a sufficient amount of working capital.

The debt ratio (long-term debt to tangible assets) averages around 6.0 which means that ROPs long-term debt is around six times the value of its tangible assets. This high ratio is because ROPs assets are largely intangibles and goodwill which are not included in the ratio calculation. The tangible assets are used for the ratio calculation because these are hard physical assets that can be sold off in the event of bankruptcy liquidation whereas intangibles and goodwill cannot be sold.

The total ratio (total liabilities to total assets) averages around 50% which means that ROPs total assets are worth twice its total liabilities.

The earnings growth for the 2014 fiscal year is projected to grow at 13% (based on the five year earnings growth trend). The revenue is projected to grow at 9% (based on the five year revenue growth trend).

The forward PE ratio is around 23 (calculated from the five year earnings growth trend rather than from forecast earnings). The forward PEG is around 1.8.

The current business valuation would drop to around $52 with no earnings growth (with a 2.5% ten year Treasury bond yield).

ROPs book value is around $42 and if GWW does run into financial problems in the future this gives an idea of how far the stock price could drop.

The bankruptcy risk can be calculated using the Z-score. ROPs Z-score is 3.6 which means ROP is a low bankruptcy risk stock.

The sample analysis uses data that is one year old. The hypothetical purchase date for the stock is 19-Jun-2014 and this allows the reader to see how the stock performed over the next year.

ROP had its 2014/03 quarterly results released prior to 19-Jun-2014 and this information is available for the analysis. The 2014 Q1 earnings showed an increase of 17% over the same quarter from a year ago (2013 Q1). The 2014-Q1 dividend is $0.20 for the quarter which is a 18% increase over the same quarter from a year ago (2014 Q1).

Overall the fundamentals are strong with this large-cap dividend paying stock which has the characteristics of a growth stock as a bonus. Additional information such as consensus forecast earnings, broker recommendations and insider transactions are not considered for this sample analysis. A hypothetical position taken in ROP on the 19-Jun-2014 would give a purchase price of around $148.

The stock price performance is shown below in Chart 1. along with the annual earnings year to year growth. The stock chart is adjusted for splits and dividends.

Chart 1. Stock chart with earnings for ROP

weekly Chart ROP

As shown in Chart 1. above, ROP gained 20% over the next year including dividends. ROPs 2014 annual earnings increased by 18% over the 2013 fiscal year and its 2014 dividends were $0.85 which is an increase of 21% over the 2013 fiscal year.

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