Often the best places to find gains are in those firms that provide raw ingredients or base materials that other producers use in their products. The business model – dubbed “picks and shovels” – can be very lucrative. After all, it doesn’t matter which end-user finds success with their product or not, the picks & shovels play is able to make plenty of money selling the ingredients needed. Even better is if your supply specializes in ingredients and materials.
And that’s just what our Best Dividend Stocks List pick in the chemicals sector has done for decades.
Our pick is one of the largest producers of ingredients used by food and consumer goods manufacturers, known for their flavors, scents and other additives that form the basis for many of the products we consume in our daily lives. From your toothpaste and shampoo to last night’s pad thai dinner, our pick’s products are used by a myriad of OEM producers.
This successful run has continued to benefit our selection for years: Sales remain steady and recession-restsient as the firm continues to touch a wide variety of industries, which has helped it remain a top income pick during the pandemic. In fact, our selection managed to raise its payout again this past August.
But even more growth could be coming down the pike.
Thanks to its size and leadership position, our pick has long been an M&A machine, and it recently closed one of its largest transactions ever. This buyout will add tons of new capacity and products and is expected to make it the top dog in the sector by a wide margin. New high-margined opportunities await the firm.
In the end, our pick offers a modern take on the old “pick & shovels” play. One that will pay dividends for years.
To summarize, here are five reasons why you should own this stock:
- It is one of the largest players in the additives industry, pulling in more than $2.5 billion in sales during the first half of 2020.
- A wide moat helps it provide products for many end-users across multiple industries.
- Smartly used M&A to grow its bottom line, making it a dominant player in its niche.
- Has been a great dividend stock throughout its history and recently upped its payout.
- Healthy payout ratio of 53% and growing yield of 2.5%.
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