by Ian Harvey | November 27, 2013 9:18 am
Ecolab (ECL[1]), which develops and markets products and services for the hospitality, food service, healthcare and industrial markets in more than 170 countries, will possibly announce a higher dividend in the coming week.
The stock currently has a dividend yield of 0.9%, with quarterly payments of $0.23 per share. The company usually announces its dividend increase right at the start of December. This year the stock has easily outperformed the overall market with a gain of 49.5% year to date. This is definitely a great motive, along with other positive factors, to see a surge in the recommended options call.
Due to ECL’s strong operating results, the total return of Ecolab shares have far outpaced that of the S&P 500 over the past 20 years. Over that time, Ecolab’s total return has been nearly 1,800% versus the almost 300% total return of the S&P 500. This is due to a combination of organic revenue growth; investment in R&D and internal operations, and acquisitions — which has helped fuel the company’s impressive operating performance. Even though ECL has a high valuation it still offers an attractive return potential in the foreseeable future.
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ECL has a 12-month high of $108.34 and a 12-month low of $69.26, which means that the stock is very likely to continue to trend upwards according to bullish technical indicators. The stock has support above $105.00.
The stock’s 50-day moving average is $102.62 and its 200-day moving average is $89.90 and has a market cap of $31.352 billion and a price-to-earnings ratio of 37.06.
It is important to note that the earnings report by Ecolab on Tuesday, October 29 reported $1.04 EPS for the quarter, beating the Thomson Reuters consensus estimate of $1.03 by $0.01, which means that this company is providing a solid record of growth.
Ecolab has met or exceeded management’s EPS expectations in 85 of the last 86 quarters. ECL is targeting long-term EPS growth of 15 percent, which is conservative given the growth opportunities that lie ahead.
The company had revenue of $3.48 billion for the quarter, compared to the consensus estimate of $3.54 billion. During the same quarter last year, the company posted $0.87 earnings per share. Ecolab’s revenue was up 15.2% compared to the same quarter last year. On average, analysts predict that Ecolab Inc. will post $3.54 earnings per share for the current fiscal year.
About 90 percent of its sales are recurring, which provides earnings support during economic downturns, therefore stability is certainly a favorable factor for continued growth. As the largest player in highly fragmented industries, it has plenty of opportunities to grow its market share organically as well as through acquisitions.
A number of research firms have recently commented on ECL:
[5]Based on the past, it is expected that dividend investors will start accumulating ECL shares ahead of the expected dividend increase, and since this is a shortened trading week due to Thanksgiving, there should be an increase in buying interest. Last year the stock announced a higher dividend on December 6, but in the prior two years the news came at the start of the month, therefore this should push the stock price higher, providing for a good profit from the following call option.
Recommendation: Buy the ECL Jan 2014 110.000 call (ECL140118C00110000[6]) at or under $1.40, good for the day. Place a protective stop limit at $0.55 and a pre-determined sell at $2.20.
As of this writing, Ian Harvey did not hold a position in any of the aforementioned securities. Visit his site, stock-options-made-easy.com[7], for a wealth of information that will help you benefit from the exciting and lucrative world of options trading.
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