We recently published a list of the 15 Low Profile Dividend Champions to Buy. In this article, we are going to take a look at where West Pharmaceutical Services, Inc. (NYSE:WST) stands against other low profile dividend champions.
Companies known as Dividend Aristocrats belong to the S&P Index and have raised their dividend payments every year for a minimum of 25 years. On the other hand, Dividend Champions have also maintained at least 25 straight years of dividend growth, though they may not be part of the broader market.
It is possible to pursue a strategy that offers both income and growth. Companies that regularly increase their dividends—often referred to as dividend growers—are typically financially sound, well-managed, and of high quality. Over the long term, these businesses not only show lower levels of volatility but also tend to deliver better performance than the broader market, such as the S&P Equal Weight Index. According to a report by Guggenheim, companies that grew and initiated their dividends between May 2005 and December 2024 delivered an annual average return of 10.5%, compared with a 5.5% return of those companies that cut or eliminated their payouts during this period. The broader market produced a 10.4% return on an annual average basis, slightly underperforming the dividend growers.
The report also mentioned that dividend growth strategies have generally shown strong performance in both rising and falling markets. For investors, this offers a chance to benefit from long-term market gains while also helping to preserve more value during inevitable market downturns.
Dividend-paying stocks provided investors with a degree of stability during the volatile month of March, according to Bank of America, which highlighted several standout names during the market’s rough patch. The firm noted that value and dividend-focused stocks performed well that month, as concerns over President Donald Trump’s tariff policies unsettled the broader market. The firm’s quant strategist, Nigel Tupper, said the following in an April 11 report.
“In March, as global equities fell -4.1% on concerns tariffs could increase and slow growth, the best performing global styles were Value and Dividends,”
With investor demand for dividend stocks on the rise, many companies have been steadily increasing their payouts. A report from Janus Henderson revealed that global dividend payments reached an all-time high of $1.75 trillion in 2024, reflecting a 6.6% increase on an underlying basis. The overall headline growth was 5.2%, influenced by fewer one-off special dividends and a stronger US dollar. Out of 49 countries in the index, 17— including major contributors like the US, Canada, France, Japan, and China—set new records for dividend payments. Overall, 88% of companies worldwide either raised their dividends or maintained them throughout the year. Looking ahead, Janus Henderson forecasts that global dividends will rise by 5.0% on a headline basis in the coming year, reaching a new record of $1.83 trillion. Although the stronger US dollar is expected to weigh on headline growth, the underlying growth rate is projected to come in slightly higher, around 5.1%.
A closeup of multiple drug containment systems in an array of colors.
Our Methodology:
For this article, we scanned a list of Dividend Champions, which are companies that have raised their payouts for 25 consecutive years or more. From that list, we picked some lesser-known companies with sound financials and strong balance sheets and ranked them according to hedge funds having stakes in them, as per Insider Monkey’s database of Q4 2024.
At Insider Monkey, we are obsessed with hedge funds. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
West Pharmaceutical Services, Inc. (NYSE:WST)
Number of Hedge Fund Holders: 35
West Pharmaceutical Services, Inc. (NYSE:WST) develops and sells products used in pharmaceuticals, biologics, vaccines, and consumer healthcare. In its latest earnings report, the company noted that its core operations continue to thrive, supported by its strong market positions and proprietary processes. Looking ahead to 2025, management expressed confidence in continued momentum within key segments of the Proprietary Products business, citing positive trends in High-Value Products (HVP) across Biologics and Generics, along with growth stemming from Annex 1 and GLP-1 developments.
In the fourth quarter of 2024, West Pharmaceutical Services, Inc. (NYSE:WST) reported revenue of $748.8 million, which showed a 2.3% growth from the same period last year. The revenue surpassed analysts’ estimates by nearly $8 million. Organic net sales rose by 4.5%, with High-Value Products (HVP) accounting for around 74% of the segment’s total sales during the period. This was largely driven by strong demand for self-injection device platforms. Additionally, fourth-quarter revenue received a roughly $25 million boost from customer incentives tied to volume targets met for HVP delivery devices.
West Pharmaceutical Services, Inc. (NYSE:WST)’s cash flow for the year came in at $653.4 million, and its free cash flow amounted to $276.4 million. The company’s quarterly dividend currently sits at $0.21 per share and has a dividend yield of 0.41%, as of April 17. Its dividend growth spans 32 years.
Overall, WST ranks 4th on our list of low profile Dividend Champions to invest in. While we acknowledge the potential of WST as an investment, our conviction lies in the belief that some deeply undervalued dividend stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for a deeply undervalued dividend stock that is more promising than WST but that trades at 10 times its earnings and grows its earnings at double digit rates annually, check out our report about the dirt cheap dividend stock.
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Disclosure: None. This article is originally published at Insider Monkey.