Dover Corp. (DOV): Vary attractive value stock

By J. Royden Ward, Editor of Cabot Benjamin Graham Value Letter
From Cabot Wealth Advisory 1/24/13 Sign up for free Cabot Wealth Advisory e-newsletter

I scanned the list of 54 Dividend Aristocrat stocks to find undervalued companies with better-than-average dividend growth prospects for the future. Dover Corp. (DOV) is a blue chip company that currently sells at an attractive price.

Dover is a diversified industrial manufacturer, but unlike many companies in the industrial sector, Dover has minimal dealings with the U.S. and other governments that are initiating drastic spending cuts. The company’s output includes: compressors, flow meters and bearings for industrial and aerospace customers; pumps and valves for clients in the petroleum industry; and microwave filters and automated equipment for the assembly of circuit boards for electronic industry manufacturers.

Dover recently acquired Anthony International which makes specialty glass doors for refrigerators and freezers. Anthony will add noticeable sales and earnings in 2013 and beyond. The acquisition, plus the divestiture of underperforming assets, will enable sales and earnings growth to accelerate in 2013. Sales will likely increase 9% and EPS (earnings per share) will climb 15% to 5.48 in 2013.

At 12.4 times my 2013 EPS forecast and with a dividend yield of 2.1%, DOV shares are very attractive and should outperform the S&P 500 Dividend Aristocrats Index during the next 12 months. Dover Corp. has increased its dividend every year for the past 25 years and will very likely increase the dividend by a substantial amount at mid-year. The dividend coverage ratio for DOV is a very conservative 29%–well below the maximum target of 50%. Buy DOV now.

Editor’s Note: You can find additional dividend-paying, high-performing stocks selling at bargain prices in the Cabot Benjamin Graham Value Letter. In every issue, you’ll find my legendary Maximum Buy and Minimum Sell Prices for over 250 stocks. Click here for more information.