3. Donaldson Company, Inc. (NYSE:DCI)
Number of Hedge Fund Holders: 29
Donaldson Company, Inc. (NYSE:DCI) is a Minnesota-based filtration company that is engaged in the production of air filters used in a wide range of industries. The company is focused on growing its market presence, strengthening its customer base, and improving its product offerings through acquisitions. In August 2024, Donaldson acquired a 49% minority stake in Medica S.p.A. The addition of Medica’s technology and expertise in filtration products will allow the company to enter new markets and expand its offerings in the medical device and water purification industries. The stock is up by nearly 11% since the start of 2024.
In fiscal Q1 2025, Donaldson Company, Inc. (NYSE:DCI) reported revenue of over $900 million, which showed a 6.3% growth from the same period last year. Nearly all the segments of the company showed growth during the quarter, with the Aerospace and Defense category emerging as the winner. The segment reported a 26.8% growth on a YoY basis.
Heartland Advisors made the following comment about Donaldson Company, Inc. (NYSE:DCI) in its Q1 2024 investor letter:
“Industrials. Donaldson Company, Inc. (NYSE:DCI), a filtration manufacturer with more than a century of experience in air, lubricant, hydraulic, and fuel filtration applications, is a new position this quarter.
DCI, an example of a stock in our quality value bucket, typically trades at a premium to its peers, an indication of the market’s appreciation for its economically resilient revenues and high profit margins. However, the company has faced margin headwinds lately, in part owing to heavy upfront investment in its fast-growing life sciences segment. Moreover, several of DCI’s cyclical end markets, including agricultural, mining, and construction equipment, have been under pressure as lower equipment utilization has translated into fewer filter replacements.
We think investors have already incorporated the life sciences operating losses in the company’s valuation, but we believe the segment will ultimately be accretive to revenue growth and margins. If life sciences operating margin approaches the corporate average of around 15% over the next two years, that could translate to a 10-15% lift in total earnings power. For context, this segment’s operating margin exceeded 20% prior to the current investment phase…” (Click here to read the full text)
Donaldson Company, Inc. (NYSE:DCI) ended the quarter with over $221 million available in cash and cash equivalents, compared with $232.7 million last year. Its operating cash flow for the quarter came in at $73 million. This cash generation was sufficient to support dividend payments worth $32.4 million. The company’s quarterly dividend comes in at $0.27 per share and has a dividend yield of 1.50%, as of December 16. It is one of the best mid-cap dividend aristocrats on our list as the company has raised its payouts for 29 consecutive years.
As per Insider Monkey’s database of Q3 2024, 29 hedge funds owned stakes in Donaldson Company, Inc. (NYSE:DCI), growing from 26 in the previous quarter. These stakes have a total value of over $308.4 million. Among these hedge funds, Impax Asset Management was the company’s leading stakeholder in Q3.
