Investing In Security Services Dividend Stocks
A few weeks ago I wrote an article titled, “Open Fire On These Dividend Stocks,” and discussed the notion of investing in dividend paying companies in the firearms and ammo sector. Expanding on this concept of personal safety and security I want to highlight several other dividend paying companies that are involved in providing security services for commercial and residential customers as well as armored transportation services. While there are many companies that provide these security services, the vast majority of them are private. With that being said, let’s highlight some potential public dividend paying candidates that might find a home in your dividend portfolio.
First up is one of the largest names in the security business, Tyco International Ltd. (TYC). TYC is a name many people are already familiar with as many homes and businesses rely upon their security services. Besides its vast offering of security services, TYC also offers fire detection, fire suppression, video surveillance systems and various smoke, heat and chemical detectors. TYC currently offers a relatively low 1.70% yield with a moderately low payout ratio of 36.4% on an EPS of 2.21. While a current low yielding stock, TYC does have an impressive ten year annualized dividend growth rate of 19.81%. Don’t buy this stock for the current yield rather hold on to it for great dividend growth. On the valuation side of things TYC has a current PE of 19.76 which is slightly higher than the market as a whole but doesn’t appear to be too overvalued.
Next is another company that doesn’t need much of an introduction as their signs are in front of many homes and businesses, The ADT Corporation (ADT). While providing much of the same security services as TYC, ADT also offers personal emergency response services and can contact medical personnel for health related emergencies. Currently yielding a decent 2.17% with a moderate payout ratio of 40.6% on an EPS of 1.65, ADT does not have a long dividend history. It is on the path of being able to continue to raise its dividend going forward though. From a PE perspective ADT is slightly more expensive than the market and its peers at 22.27. Forward PE looks a lot more attractive at 17.20.
This next stock is definitely not a household name, though some its products are surely found in many homes and businesses, and happened to find its way into my portfolio via a spin off from Ingersoll-Rand Plc (IR). I’m talking about Allegion plc Ordinary Shares (ALLE). You might be familiar with some of ALLE’s noteworthy brands such as Schlage, Steelcraft and for those of you who lock up a bicycle, Kryptonite. ALLE is in the business of access control and produces and distributes various mechanical and electronic locks, video surveillance and vehicle recognition products as well as other security services. While a newly traded stock, as a result of a recent spin off from IR, ALLE has a very, very long history spanning over a century in the access control sector. Currently yielding a tiny 0.61% with an equally tiny payout ratio of just 13.2% based on an EPS of 1.65, this stock has plenty of room to raise its dividend going forward. With a current PE of 31.88 it seems that share price has run of ahead of earnings as ALLE is definitely considered overvalued at current prices relative to the market and its peers. Forward PE looks a lot more attractive at only 17.90. You might want to wait before pulling the trigger in this one.
Another dividend paying stock in the security services sector is ABM Industries Incorporated (ABM). ABM is diverse in its corporate offerings as it provides security services comprising staffing of security officers, mobile patrol services as well as access control devices and security consulting services. In addition, ABM also provides many business supportive services such as carpet cleaning, dusting, polishing and HVAC maintenance and repair services. This company is probably the most diverse in its offerings. ABM currently yields a respectable 2.27% with a payout ratio of 38.3% based on an EPS of 1.26. ABM has one of the longest histories of dividend growth among stocks in this sector going back 46 years. It’s ten year annualized dividend growth rate is at a decent 4.76%. Nothing stellar but definitely a nice long term growth rate for those looking for a growing dividend. On the valuation side of things ABM has a current PE of 21.62 and a forward PE of 12.1. Clearly, current prices may be a tad high relative to earnings which might give you reason to wait before purchasing this stock.
Finally, in our overview of security service businesses is armored transportation company The Brink’s Company (BCO). A company that was founded in 1838 and is synonymous with their famous armored vehicles you see in cities all over the world, BCO also offers cash management services, including money processing, safes and safe control devices, cash processing, check imaging services, counterfeit detection and electronic reporting. By that description you’d think I was describing a bank. BCO currently yields a small 1.90% yield with an equally small payout ratio of 33.3% based on an EPS of -0.28. Forward PE for BCO looks more attractive at 11.90 which puts it well below peers and the S&P.
Clearly there are some interesting picks, from a dividend perspective, in the security services sector. Have you ever thought about investing in this space and are any of these names on your watch list or in your portfolio? Please let me know below.
Disclosure: Long IR, ALLE