Thursday, July 28, 2011

Company Highlights Donaldson Company (DCI)

Donaldson Company (DCI) manufactures filtration systems and replacements parts including air and liquid filters, exhaust and emission control product, in-plant air cleaning systems,air purification systems, intake systems and specialized filters.

By Steve Cook
All American Investor

Company Highlights

The company has grown profits and dividends at a 12-14% pace over the last 10 years earning a 18-20% return on equity. As with most industrial equipment suppliers 2009 was a tough years.

However, the company has returned to its above average rate of earnings growth as a result of:

(1) across the board increase in demand for its equipment at the global economy

(2) an expanded distribution network improving its service capability,

(3) expansion into emerging markets,

(4) the introduction of new products through technological innovation,

(5) improved productivity coming from a comprehensive cost rationalization

The major negative for DCI is rising commodity costs.

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Statistical Summary

Statistical Summary

                           Stock       Dividend         Payout          # Increases
                          Yield        Growth Rate   Ratio Since     2001

DCI                     0.9%             8                   18%             10

Ind Ave                 1.5               6                    20                NA

                          Debt/                                  EPS Down        Net              Value Line
                          Equity                ROE        Since 2001        Margin          Rating

                            24%                   22%           1                      9%                 B++
Ind Ave                41                      20            NA                     8                     NA

Note: DCI stock made good progress off its March 2009 low, surpassing the down trend off its June 2008 high (red line) and the November 2008 trading high (green line). However, recently the stock fell below the lower boundary of that up trend, found support and re-set to a trading range (purple lines). Long term the stock is in an up trend (straight blue lines). The wiggly blue lines are Bollinger Bands. The Aggressive Growth Portfolio owns a full position in DCI. The upper boundary of its Buy Value Range is $49; the lower boundary of its Sell Half Range is $79.

Original content Bob DeMarco, All American Investor