As consumers or enterprise customers, we often only think in terms of finished products. Whether it’s food, personal goods or machinery, the focus is always on the product itself. But the reality is, there’s a whole ecosystem of raw materials and parts that go into everything we buy or use. For those firms supplying the necessary ingredients to make finished goods happen, this can be manna from heaven. After all, it doesn’t matter whose finished goods win with consumers or businesses, when you’re supplying everyone, you win.
And our pick in the chemicals & additives sector just happens to be one of the biggest suppliers of them all.
Our pick produces the various scents, flavors and even textures in a variety of consumer goods. This niche has served it well over the years, and particularly well during the pandemic. Irrespective of the retailer or consumer products firm, our pick was able to get in on the action. This buoyed sales during the year and helped the firm get through the pandemic unscathed.
Better still was that our pick managed to get even bigger. Thanks to some well-timed M&A, our pick has managed to expand both in size and scope. This buyout also brought plenty of natural and nutrient additives/products into its umbrella. This should continue to add a real touch of growth to its bottom line as consumers shift their tastes and preferences to more healthy options.
In the end, our pick has continued to benefit from being the supplier to everyone, and the pandemic has only strengthened its position.
To summarize, here are five reasons why you should own this stock:
- One of the largest players in the additives industry, pulling in more than $5 billion in sales during fiscal 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.
- Strong history of dividend growth – with it even managing to increase its payout by 3% during the pandemic.
- Healthy payout ratio of 54% and growing yield of 2.1%.
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