I Just Found The Most Overlooked Dividend King in The Market... (STRONG BUY!) 🚨

0:00 Hey, welcome back subscribers to my world of socks. My name is Ali, of course, and hey, I don't know if you guys have noticed this, but you know, when most investors talk about dividend kings, they almost always bring up the same names. They talk about Coca-Cola, PepsiCo, Procter & Gamble, Johnson & Johnson, maybe a couple others, too. But, you know, don't get me wrong, these are huge iconic businesses that almost anyone will immediately recognize, and there's a lot to like about them. But, because they're already just so well known, Wall Street tends to price them at a consistent premium, where you'll rarely ever get a very big discount, if at all, and that tends to limit some of the upside potential. Well, recently, I started looking deeper into a company that I feel almost nobody ever talks about. I rarely see it. And to be honest, the more that I research them, the more I find that I really like what I see in this name. it is another dividend king. It has an amazingly sticky business. The valuation is dirt cheap, and the overall package just looks very compelling at today's levels.

1:02 And that is ABM Industries, ticker symbol ABM. Now, if that name doesn't immediately ring a bell for you, well, it's because ABM doesn't sell any flashy consumer gadgets or develop, you know, any type of like high-tech AI software. But, rather, what they do handle is some of the most essential facility and infrastructure solutions for some of the other the biggest operations the biggest companies and corporations in the entire world. Yet, despite running an essential business with sticky, recurring, multi-year contracts worth hundreds of millions of dollars, well, the stock has been heavily suppressed in recent years, which I feel could be setting up a bit of like a coiled spring type of pop in the future, something that I think could occur.

1:52 Now, to understand why it's been so heavily slept on, though, we'd really have to start first with that business. Now, this isn't just some basic janitorial outfit, although the market has been kind of treating it like one more recently, but rather ABM generates over $9 billion of annual revenue. That's across five very important divisions. But the largest of those being business and industry, which makes up around half close to half of all their sales is around 44% at the moment.

2:18 It covers commercial engineering, facility maintenance, and even parking management and more. And there's also manufacturing and distribution. That's at around 21% of sales, about a fifth of the company there, which serves industrial plants, you know, distribution hubs, that's a big one for them, and even clean room environments, too. Now, the third is aviation. I see a lot of potential there. It's actually been growing at a pretty nice clip, but it's only at around 14% of sales currently, and it generates a few hundred million across major airport terminals, while offering various services, too, like cabin cleaning and even passenger assistance.

2:53 And currently, they're going through a major international expansion at Heathrow Airport, as well. Now, the rest though comes from technical solutions, that's 11%. That's handling high-voltage power systems and EV infrastructure. I know, who would have thought? It's actually a very big deal. I also think that they're going to continue to see a very sharp rise in demand there very long term from there. but there then apart from that, there is also education at about 10%, too. And that's just in really servicing public school districts and even universities. Now, again, these are multi-year sticky service contracts that we're talking about. And because these airports and factories, again, distribution hubs, offices, schools, they have to operate around the clock. They can't just cancel these essential maintenance and engineering crews to try to save on costs. They're the vital service backbone here, really keeping these facilities up and running every single day. And through it all, ABM is even getting a bit of a high-tech polish now that is quietly becoming their biggest growth engine of all. It's actually one of the reasons why I started to get more interested in this name is because of this. Now, it's tucked within their manufacturing and technical solutions segments. And through the first 9 months of this year, it generated about 3/4 of a billion dollars. And that came strictly from semiconductors, microgrids, and data centers. I know, it's pretty surprising stuff, right? But that posted growth of 26% organically and 40% total when factoring in acquisitions.

4:28 And that was all while delivering also double-digit operating profit margins, so very big deal. Now, in semiconductors alone, year-to-date revenue soared by 65% as you'd probably expect. It was even more. it was like higher than I think 120% total following their acquisition of WGN Star, which is a big one. for this area, IBM works directly inside of semiconductor plants, and they provide cleanroom services, tool installation, and even precision equipment testing for major chip-producing companies.

5:03 microgrids, their Raven Volt brand delivers turnkey power resilience and battery storage systems. And they grew nearly four times since acquisition to generate another 300 million dollars year-to-date. And for data centers, they're providing now UPS power maintenance and critical cooling solutions, too, to keep these these data centers really up and running. >> >> again, it's just another example here of how IBM seems to find a way to enter these various new kind of markets and sectors and almost like dig their way into them to figure out what is like the most vital needs for these companies. Let's produce it ourselves at a high level.

5:44 Let's offer it to them. And then let's you know, let's let's collect some very sticky contracts here long-term where these companies are not going to be able to go without our services. It's a really just like a brilliant strategy that they've had for for such a long time. And really in this case in particular, again, this is kind of what drew me over to the stock more recently, the reason why I started researching them >> >> is because they they just kind of did this once again where they saw the AI boom taking place, the whole kind of tech revolution happening right now, and they said to themselves, "Hey, let's adapt here once again and let's start to offer to, you know, wire their microgrids, let's service their chip fabs, let's you know, even power and maintain these giant AI data centers."

6:28 And it was all really, again, just another example of how ABM is just so incredibly resilient and able to adapt to changing trends in the whole kind of macro economy and environment. And yet, despite all of that, despite that incredible business structure that they hold, the market still treats this company like it's more of one just kind of stuck in the past, more of like an old-fashioned school and office cleaner, even though it's not at all. Now, historically, that was still great for them and they had really a long track record of incredible success with the stock climbing, you know, consistently over decades. It really only ever dipped during like macro cause events and even then, the stock price would almost always result in a large rebound shortly after those dips.

7:21 But more recently, we've had that same kind of setup here where over the past 5 years, the stock is pretty much flat here and it's been heavily suppressed by, I would say, really the downturn in commercial real estate coming off the pandemic where we not only have high interest rates, of course, now, but, you know, hybrid work also took off, office vacancies climbed, and analysts figured that this might just be, you know, turning into a a bit of a dying industry for them. Which, don't get me wrong, those office concerns are real, but the market painted the entire business here with the same brush and totally ignored what's happening in their industrial, in their aviation, and in their tech divisions, too, where they're actually seeing a lot of success and growth and future potential.

8:05 That's created a pretty undeniable gap in the valuation, at least in my opinion, where ABM now trades over 30% cheaper than the rest of the sector based on profits. Again, that's a gigantic discount for an established dividend king. You wouldn't normally see that. speaking of which, this is a dividend here that has now been raised for nearly six decades in a row. So, we're talking, you know, through the stagflation of the '70s, the '87 crash, the dot-com bubble, the Great Recession, and even the 2020 lockdowns and beyond. It's a payout that just simply never stopped growing.

8:41 Now, today, it only equates to a yield of around 2.3%, which is not, you know, the ultra-high yield that tends to excite new investors very much out there you know, for dividends. But, two things on that. Number one, it's still one of the one of their highest yields of the past decade. So, it's not a bad yield. Investors historically were, you know, just fine collecting much lower yields than that. number two, you have to consider, too, here that the real power for a dividend like this comes from comes from its growth potential. It comes from dividend growth investing.

9:17 See, stocks like this that consistently grow their payouts over time can actually yield you some of the biggest dividends in the market if you're willing to invest in them long-term. for example, back in the early 2000s, this is a stock that traded for around 10 bucks a share. And because they've grown the dividend every single year without fail, well, any investor who kept the stock during that time would now be collecting a giant yield of more than 11.5% It's a huge you know, huge yield there.

9:47 Now, best of all, it's a dividend that should only continue to grow larger in the future, too, since their payout ratio is still tiny at only around 30% and ABM is even known to greatly increase those payouts at any given time. Last year, for example, they grew it by close to 20%. That's a gigantic increase. And again, it's all because of the strong underlying business, which we know has faced some struggles recently, but overall sales continue to rise every year and while profits did take a hit from all the macro issues as well as you know, new acquisitions, analysts largely expect both net income and free cash flow to recover right back up in the coming years, too. In fact, we're already seeing much of that momentum take shape. Last quarter, for example, ABM posted record sales yet again, while net income jumped 19% EPS jumped 27% and management even rose their full year guidance, too.

10:41 Really, the biggest story of all here is that over the past couple years ABM spent heavily on modernizing their internal systems and rolling out new software, which caused their free cash flow to drop by about $35 million. But with those upgrades now in place, spending finally winding down, their cash flow is set to rebound in a big way. Year-to-date, it's already at almost $200 million, which is up over $150 million from this point last year and analysts project it to continue in the coming years, too, which means the dividend is extremely safe here, in my opinion, and it's going to continue to grow for the probably the next six decades again in a row, too.

11:18 Now, that's not to say that speed bumps won't occur along the way. Again, this is something that, you know, we've seen happen many times even throughout their own history, too. And even today, you've got all kinds of new issues to be aware of like, you know, the softness in commercial offices, the high interest rates, you have higher jet fuel costs from all the Middle East war going on, which you know, can can really weaken demand in their aviation unit if airlines are you know, trying to cut back on costs because of it. You could have project delays, you could have disruptions at any time, and they're even dealing with some union issues, too, for their massive 100,000 person workforce. But, that's basically why you're able to get such a big discount on a name like this that you you know, otherwise shouldn't be getting.

12:01 I really think that, you know, if we fast forward to like the next 10 years, there's no way that they continue to trade at this low of a valuation unless maybe you have, you know, some giant macro event like a huge recession or some big global catastrophic event. But, in such a scenario, the entire market would be down, too. So, it wouldn't just be a name like this that, you know, is otherwise incredibly resilient long term.

12:22 So, anyway, those are my feelings on it. Just thought I'd share my quick thoughts on, you know, a new stock here that I've been researching that I'm finding very interesting. It's high up on my watch list here that I'm looking into more. But, let me know what your own thoughts are on this one down below, too, or if there's any other stocks that you'd like me to share my opinion on next. I'd love to make those videos for you, and of course, any other stocks that I research that I like, I will be sure to bring them to you guys, and you can, you know, have your own thoughts on them, too, and and share it in the comments, and we can all talk about it. But, hey, thanks again for stopping by, my friends. I hope that you enjoyed the video. I've got more coming for you soon, so stay tuned, and I will catch you guys in the next one.

13:00 All right, take care, my friends. Bye-bye.