This is a specialty chemical company that was first recommended by The Reitmeister Trading Alert (a Zack’s newsletter). Being a trading newsletter he’s since sold out of it, so I’m not giving away anything, but I sometimes find good longterm buys from his short-term picks. What interested me is that they have 19 quarters in a row of double-digit year-over-year growth in adjusted EPS. They’ve also remade the company in the last 10 years as their specialty, higher margin chemicals have grown from 2% to 65% of their revenue. Remember though, chemicals can be a cyclical industry (though specialty chemicals probably less so). They pay a rapidly increasing dividend and they have bought back over 8 million shares since early 2013. They have over $100 million in Free Cash Flow per quarter so can afford to buy back and give dividends and still have plenty left over for growth and acquisitions.
Here are a couple of recent press releases.
Oct 2014 – 25% raise in dividend
Declared a quarterly cash dividend of ten cents per share, representing a 25% increase and the fourth consecutive year of annual dividend growth.
We have increased our annual dividend 250% since we initiated it in 2011. This reflects the rapid pace at which we have strengthened our financial performance, and underscores the confidence we have in our ability to continue to achieve accelerated earnings expansion into 2015 and beyond.
July 2014 - June quarter results
• Adjusted earnings up 38% to $0.51 - the 19th consecutive quarter of double-digit adjusted EPS growth.
• Led by the Specialty Platform, all segments delivered year-over-year operating income gains
• Free cash flow for the quarter increased to $100 million, expanding capacity for further investment to drive growth
They continued to exit certain unprofitable products associated with the Spartech acquisition completed in March of last year. Accordingly, revenues were $1.01 billion for the second quarter of 2014, compared to $1.04 billion in the second quarter of 2013.
These actions, coupled with other ongoing initiatives to expand margins, resulted in a 38% increase in adjusted earnings per share to $0.51 for the second quarter of 2014, up from $0.37 in the second quarter of 2013.
“I am pleased to report adjusted earnings per share increased 38% to $0.51 for the second quarter representing an all-time high for PolyOne. This marks our 19th consecutive quarter of year-over-year double-digit adjusted EPS growth – an impressive accomplishment reflecting the power and sustainability of our strategy. Mix improvement continues to be at the heart of our transformation as our specialty businesses reached record levels of operating income and profitability for the quarter. Driven by an expanding portfolio of specialty solutions, our underlying mix of earnings has never been stronger with specialty now contributing two-thirds of our segment income.”
Our strong track record of converting earnings to cash continued this quarter as we generated $100 million of free cash flow. We ended the quarter with $261.5 million in cash. This, coupled with our availability under our asset-based revolver, gives us significant capacity to invest in innovation, aggressively pursue acquisition opportunities and deliver cash to shareholders. During the quarter, we repurchased approximately 1.8 million shares at an average price of $38.15, bringing the total share buyback since early 2013 to 8.2 million shares."
We are very pleased with our first half performance. While our second quarter is seasonally our strongest, we expect to deliver strong year-over-year double-digit EPS expansion for the balance of 2014. With a growing pipeline of new and differentiated solutions, we are very confident in our ability to continue to create value for our customers and deliver market-beating performance for our shareholders.