Thursday, August 1, 2013

Donaldson (DCI) 2013 Review

 Donaldson Co manufactures filtration systems and replacements parts including air and liquid filters, exhaust and emission control products, in-plant air cleaning systems, air purification systems, intake systems and specialized filters.  The company has grown profits and dividends at a 13-15% pace over the last 10 years earning an 19-25% return on equity.  As with most industrial equipment suppliers 2009 was a tough year.  However, the company has returned to its above average rate of earnings growth as a result of:

(1) expansion into emerging markets,

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

(3) improved productivity coming from a comprehensive cost rationalization program.


(1)   faltering demand in several of its end markets,

(2) rising raw material costs.

DCI is rated B++ by Value Line, carries an 10% debt to equity ratio and its stock yields 1.4%.

  Statistical Summary

                 Stock        Dividend       Payout      # Increases  
                  Yield      Growth Rate     Ratio       Since 2003

DCI           1.4%             15               28%              10
Ind Ave      1.5               11                25                NA

                Debt/                       EPS Down       Net        Value Line
                Equity         ROE      Since 2003      Margin       Rating

DCI           10%           21%           1                  11%          B++
Ind Ave     30              17             NA                 9              NA


            Note: DCI stock made good progress off its March 2009 low, quickly surpassing the downtrend off its June 2008 high (straight red line) and the November 2008 trading high (green line).  Long term, the stock is in an uptrend (blue lines).  Intermediate term, it is in a trading range (purple lines).  The wiggly red line is the 50 day moving average.  The Aggressive Growth Portfolio owns a full position in DCI.  The upper boundary of its Buy Value Range is $33; the lower boundary of its Sell Half Range is $47.



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