Air Products & Chemicals is the 30th stock in my portfolio and the first from the basic materials sector. I've researched many materials stocks and concluded APD would best fit my objectives. I've been looking to add this one for quite a while and have had a number of different limit orders which never filled for one reason or another. Over the weekend I placed a new order which triggered at $77.54. I bought 16 shares that come with a 3.28% yield after commissions.
To be fair, all is not rosy at Air Products right now. The company had a subpar year which is why it's trading at the 52 week low. Earnings are mostly flat; sales were lower in a number of segments; management admits mistakes (which I actually appreciate, I like honesty). 2013 is forecasted to be another slow year, although better than 2012, with mild earnings growth. The success of this company is impacted by the U.S. and world economy more than the typical dividend growth stocks I buy. APD is currently planning a number of new projects throughout the world but seems to focus mainly in China. There are projects in other countries such as South Korea, Belgium, UK and US. Overall it appears earnings should be up next year in the 5-8% range. Obviously this is just a forecast.
I like Air Products for a number of reasons. First of all I think it offers a lot of value at today's prices. It has a reasonable P/E of 14.3 and an attractive yield with a 30 history of dividend growth. I have a target price of $83 on this stock and was able to pick up shares less than that. The fact that I can get a quality dividend champion trading at 52 week lows validates my thoughts. In my opinion, APD is the best dividend growth stock from the materials sector. This is for my strategy; I require a yield of at least 2.75%.
It is interesting to note that when I wrote about Air Products back in March it had a high beta of 1.29. Since that time the beta has actually decreased to about 1.16. I typically prefer low beta stocks, but it's not a rule set in stone. If the world economy does pick up APD should do very very well. I also like the fact that APD operates a number of different businesses serving a wide variety of industries. This company is not a one trick pony.
Some of Air Products biggest competitors include Praxair (PX) and Airgas (ARG). Both of these stocks are dividend contenders but have low yields around 2%. Not my cup of tea but could fit different investment strategies.