Dividend Aristocrats Part 38: Ecolab Inc. (ECL)

Ecolab Inc. (NYSE:ECL) is the largest publicly traded company in the cleaning products industry. The company currently has a market cap of $34 billion.

ECL Logo

The company is an industry leader in the ‘boring’ cleaning/safety industry. Ecolab is in the business of providing safe food, clean water and energy, and a healthy environment through its various products and services.

Among the hedge funds and institutional investors tracked by Insider Monkey, Ecolab is not very popular. Out of over 730 funds that we follow, 26 reported long positions in the company as of the end of September, amassing 6.60% of the company’s outstanding stock, versus 23 funds a quarter earlier. Eagle Capital Management and Bill & Melinda Gates Foundation Trust are among Ecolab’s top shareholders, owning 9.07 million shares and 4.37 million shares as of the end of September, respectively.

Ecolab may not be a household name company, but it does have very sizeable operations:

– 47,000 employees

– $13.8 billion in annual revenues

– Servicing customers in over 170 countries

– Servicing customers in over 1.3 million locations

Ecolab’s Dividend History

The company has increased its dividend payments every year since 1985, giving it a streak of 30 consecutive years of dividend increases. The company’s long dividend streak makes Ecolab a Dividend Aristocrat.

Ecolab’s dividend history is shown below:

Ecolab Dividend History

The company has not reduced its dividends since at least 1978, and has paid dividends for 79 consecutive years. Few businesses can match the consistency and longevity of Ecolab.

Ecolab’s most recent dividend increase was on December 3rd; the company raised dividend payments by 6%.

Unfortunately for investors seeking current income, Ecolab has a low dividend yield of just 1.2% due to its conservative payout ratio of 34.8%.

Business Unit Overview of Ecolab

Ecolab’s business is divided into four primary segments.

Each segment’s percentage of total operating income generated for Ecolab through the first 9 months of the company’s fiscal 2015 is shown below to give an idea of the importance of each segment:

– Global Industrial generates 28% of total operating income

– Global Institutional generates 38% of total operating income

– Global Energy generates 29% of total operating income

– Other generates 5% of total operating income

The Global Industrial segment operates under 4 divisions:

– Global Water

– Global Food & Beverage

– Global Paper

– Global Textile Care.

The Global Water division provides water treatment programs and products under the Nalco name. The Global Food & Beverage Division provides cleaning and health products and services to breweries, soft-drink bottlers, the dairy industry, and the meat and poultry industry. The Global Paper division provides water and process applications to the pulp and paper industry. The Global Textile Care division provides washing solutions for the uniform rental, hospitality, and health care industries.

The Global Institutional segment is Ecolab’s largest based on operating income. The segment breaks its operations into 3 divisions:

– Global Institutional

– Global Specialty

– Global Healthcare

The Global Institutional division (within the Global Institutional segment) provides equipment and cleaning products for warewashing (restaurant scale dish washing), laundry, food-safety, and housekeeping. The Global Specialty segment provides restaurants with cleaning products under the Kay name. The Global Healthcare division provides cleaning and infection prevention solutions to the healthcare industry.

The Global Energy segment operates under the Nalco Champion name. The segment’s operations are divided into an upstream and downstream division. Both divisions serve the chemical and water treatment needs of the petroleum and petrochemical industries.

The Other segment is Ecolab’s smallest by far. The segment is responsible for just 5% of total operating income.  The Other segment provides pest elimination as well as kitchen repair operating services.

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