Nordson Corporation (NDSN): Dispensing Higher Dividends for 52 Straight Years

Dividend Analysis

We analyze 25+ years of dividend data and 10+ years of fundamental data to understand the safety and growth prospects of a dividend. NDSN’s long-term dividend and fundamental data charts can all be seen by clicking here.

Dividend Safety Score

Our Safety Score answers the question, “Is the current dividend payment safe?” We look at factors such as current and historical EPS and FCF payout ratios, debt levels, free cash flow generation, industry cyclicality, ROIC trends, and more. Scores of 50 are average, 75 or higher is very good, and 25 or lower is considered weak.

NDSN’s dividend Safety Score of 72 is very good and indicates that the company’s current dividend payment is extremely safe.

Over the last four quarters, NDSN’s dividend has consumed 27% of its earnings and 28% of its free cash flow, which provides plenty of wiggle room for the company to continue paying and growing the dividend.

Looking further back, we can see that NDSN’s payout ratios have remained below 30% each year over the last decade. A stable payout ratio means that the company’s dividend has grown in line with its earnings growth, which is a good thing.

Source: Simply Safe Dividends

Source: Simply Safe Dividends

While low payout ratios already provide a nice level of comfort, observing a company’s performance during the recession is also important. Despite NDSN’s large revenue base of parts and consumables (42% of sales) and exposure to consumer non-durables end markets (39% of sales), we can see that its sales declined by 27% during 2009. NDSN’s stock also returned -43% in 2008. The company’s cyclical markets are very sensitive to broader economic trends and can easily put off investing in more efficient manufacturing equipment when times get tough.

Source: Simply Safe Dividends

Despite NDSN’s sensitivity to the broader economy, it easily generates free cash flow in every business environment. Its free cash flow per share even increased in 2009 despite its drop in sales. With an annual dividend payout of $0.96, we can see that the company’s current dividend is well covered by NDSN’s free cash flow generation.

Source: Simply Safe Dividends