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4 Reasons Why I'm Passing On Dividend Aristocrat Pentair

Published Tue, 09 Jul 2019 12:33:14 -0400 on Seeking Alpha

I inherently like the idea of filling my portfolio with the Dividend Aristocrats. That is, the companies that have raised their dividend payouts for 25 or more consecutive years. And I like buying stocks that have traded sideways in recent years. Given that the stock market is up more than 50% since the early 2016 bottom, there aren't that many high-quality companies that have traded sideways over the same stretch.

Source: Google
So, I should like Pentair (PNR) stock here, right? Especially as the stock has done nothing year-to-date while the stock market as a whole has surged to new highs.
Well, unfortunately, even with the flat stock performance in recent years, I'm still not that excited about Pentair at this price.
Is The Stock Consolidating? Or Just Marking Time?
It's not uncommon for high-quality companies to see their stocks trade sideways for a few years. With Dividend Aristocrat companies, it's not uncommon for the market to bid them up beyond their justifiable fair value in the short run. Then, instead of getting a steep correction - as you might see in a high beta or lower-quality company, the stock just tends to trade flat for a few years while underlying earnings catch up to the stock price. Once earnings underpin the share price, it sets the stage for the stock to finally take off again. Diageo (DEO) would be a classic example of this playing out:
Data by YCharts The stock traded beautifully out of the financial crisis, doubling in a few... Read more

Stock name Last trade   P/E Earnings/Share Dividend/Share Dividend yield
AO SMITH 51.71   20.8 2.49 0.88 1.77


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