Lincoln Electric Will Benefit From Pain Points In U.S. Infrastructure

Among the several strategies one can use for identifying investment opportunities, one of my favorites is identifying pain points. Pain points can take many forms -- ranging from cash-strapped consumers to older Americans that are under-saved for retirement to the horrible condition of the country's infrastructure. While most of us can identify wallet-related pain points, according to the most-recent American Society of Civil Engineers' (ASCE) Infrastructure Report Card, U.S. infrastructure was rated D+. Anyone who has attended school knows a grade of D+ is not good. And while many tend to fixate on that most-recent ASCE grade, the reality is U.S. infrastructure has been in decline for a number of years. Nearly 20 years ago, in the 2001 edition of the report card, U.S. infrastructure was rated a D+ -- and it hasn't improved since then. That continued decline has given rise to these real economic pain points that ASCE has estimated: --$3.9 trillion in losses to the U.S. GDP by 2025; --$7 trillion in lost business sales by 2025; and --2.5 million lost American jobs in 2025. The combination of those two pain points has made rebuilding U.S. infrastructure become a bipartisan priority. And despite recent setbacks, because we are now counting down the months until the next presidential election and both sides of the aisles want to get points on the board, odds are an infrastructure bill will be back on the political docket before too long. Infrastructure spending would drive jobs, and job creation tends to be a vote getter. The challenging point from an investor's perspective is the timing. If only there was a company that would benefit from spending to rebuild the country's roads, bridges, electrical and water infrastructure, roads and rails and surface transportation -- and paid us to wait for the pick-up in that spending. And there is -- Lincoln Electric , a manufacturer of welding, cutting and brazing products. Welding products include arc welding power sources, plasma cutters, wire feeding systems, robotic welding packages, integrated automation systems, fume extraction equipment, consumable electrodes, fluxes and welding accessories and specialty welding consumables and fabrication. While the arc welding and cutting industry is a mature industry and cyclical in nature, Lincoln Electric has boosted its dividend per share consecutively over the last 23 years. That dividend track record means that if Lincoln continues the path it's been on, it could see itself graduating from the Dividend Contenders to the Dividend Aristocrats. Recently, Lincoln announced that its next quarterly dividend, the fourth one at $0.47 per share, will be paid on October 14. Historically, Lincoln has announced its annual dividend increase in October with that new dividend being paid to shareholders in mid-January. Last October, Lincoln boosted its quarterly dividend by 21% year over year to $0.47 per share, and while the company has delivered similar increases in the past, they tend to be followed up by more modest ones in the range of 9%-11%. If that history holds, that would put Lincoln's 2020 dividend near $0.52 per share -- or an annualized dividend of $2.08 per share. If the current dividend yield of 2.2% held, it would mean LECO shares should approach $95. Should we see an infrastructure spending bill passed, it would likely spur demand for Lincoln's products, driving cash flow and earnings along the way. In my opinion, that means we could see more meaningful dividend increases with further upside to be had in LECO shares. Now to patiently collect the company's next quarterly dividend as we wait for Washington to get its infrastructure act in gear.

Lincoln Electric Will Benefit From Pain Points In U.S. Infrastructure

This Dividend Contender pays you to wait for pick-up in infrastructure spending.

Columnist Conversation

After Its Own M&A Spree, Could Salesforce Itself Be Bought?

$SPX updated

Rolling Down Puts

COLUMNIST TWEETS

Please Join or Log In to manage and receive alerts.