My largest dividend stock investment is…
The London Stock Exchange has a wide range of dividend stocks for investors to pick from. And among the roughly 1,700 companies listed in the UK, Somero Enterprises (LSE:SOM) is among one of my favourite and largest dividend-paying investments.
Why Somero?
As a quick crash course, Somero Enterprises is a leading designer and manufacturer of laser-guided concrete laying screed machines. Itâs not likely a tool individuals will come across very often.
However, for those working within the construction industry, Someroâs machines play a critical role in ensuring the flooring in non-residential buildings is as flat as possible. Thatâs crucial for warehouses, retail stores, hospitals, car parks and, most excitingly today, data centres.
As the US ramps up its investments into infrastructure, projects for new data centres and chip foundries are steadily being greenlit. Thatâs a particularly exciting prospect for Somero, given the US is the firmâs primary target market. And itâs a tailwind thatâs already started to bear fruit, with management highlighting a backlog of US projects with activity finally ramping back up after enduring labour shortages and concrete rationing.
Whatâs up with the dividend?
Somero doesnât look like a typical choice for dividend investment. Apart from paying dividends in a foreign currency, a quick glance at the groupâs dividend history shows a constant fluctuation of hikes and cuts. The share price also seems to have followed a similar pattern of swinging up and down as well.
| Year | 2019 | 2020 | 2021 | 2022 | 2023 | 2024 |
| Dividend Per Share | $0.3095 | $0.247 | $0.3991 | $0.5172 | $0.3548 | $0.2859 |
This fluctuating pattern perfectly demonstrates the cyclical nature of Someroâs business. Since operations are entirely driven by activity within the construction industry, bad weather, higher interest rates and macroeconomic headwinds can be disruptive.
However, this isnât anything new. And managementâs prudent capital allocation and financial planning skills have kept the balance sheet debt-free despite the constant swings in cash flows.
Leadershipâs changing hands
Smart capital allocation is a rare skill to come by. So itâs a sad revelation that CEO Jack Cooney is stepping down at the end of 20 March. After 27 years of growing the company to a £153m enterprise, Cooney is off to enjoy a well-deserved retirement. And chairman Larry Horsch, who joined Somero in 2009, will also be departing at the same time.
It seems the firm is losing a lot of talent due to age. But succession planning has actually been in the works for a while. The first steps were taken last June with the promotion of Jesse Aho to chief operating officer of Global Operations and then president of the entire company six months later.
Itâs still unclear who will move into the corner office. Someroâs currently exploring external options with a third-party executive search firm. However, whether any of these candidates will be capable of filling Cooneyâs shoes remains to be seen.
Itâs a risk investorâs need to consider carefully when exploring Somero as a potential investment today. Yet, personally, I remain optimistic about the firmâs long-term trajectory. Given my already sizable stake in the business, itâs not a stock Iâm rushing to buy right now.
However, for investors seeking exposure to the construction industry ahead of artificial intelligence (AI) infrastructure investments, Somero could be worth a closer look.
The post My largest dividend stock investment is⦠appeared first on The Motley Fool UK.
Should you buy Somero shares today?
Before you decide, please take a moment to review this first.
Because my colleague Mark Rogers – The Motley Fool UK’s Director of Investing – has released this special report.
It’s called ‘5 Stocks for Trying to Build Wealth After 50’.
And it’s yours, free.
Of course, the decade ahead looks hazardous. What with inflation recently hitting 40-year highs, a ‘cost of living crisis’ and threat of a new Cold War, knowing where to invest has never been trickier.
And yet, despite the UK stock market recently hitting a new all-time high, Mark and his team think many shares still trade at a substantial discount, offering savvy investors plenty of potential opportunities to strike.
That’s why now could be an ideal time to secure this valuable investment research.
Mark’s ‘Foolish’ analysts have scoured the markets low and high.
This special report reveals 5 of his favourite long-term ‘Buys’.
Please, don’t make any big decisions before seeing them.
More reading
- As the US stock market tumbles, hereâs Warren Buffettâs advice
- £10,000 invested in IAG shares 1 month ago is now worthâ¦
- 3 top-notch dividend stocks to consider for a bigger, better SIPP
- Here are the dividend forecasts for BT shares for 2025 and 2026!
- Prediction: 5 cheap stocks to bounce back amid crazy volatility
Zaven Boyrazian has positions in Somero Enterprises. The Motley Fool UK has recommended Somero Enterprises. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
