Ecolab Beefs up Dividend

U.S. cleaning and sanitation products major Ecolab Inc (ECL - Analyst Report) has bumped up its quarterly dividend to 20 cents from 17.5 cents, representing a 14.3% growth. This lifts the annual dividend to 80 cents per share from the current payout of 70 cents. The revised quarterly dividend is payable on January 17, 2012, to shareholders of record as on December 20, 2011.

This represents the Minnesota-based company’s 20^th consecutive annual dividend raise, underscoring its commitment to deliver incremental returns to investors leveraging a solid balance sheet and healthy cash flows. The company’s previous dividend increase was in late 2010, when it raised the quarterly payout by 13% to 17.5 cents.

Ecolab continues to post healthy revenue growth driven by new business wins, product launches and sustained strong performances across its Asia-Pacific and Latin American operations. The company remains optimistic about delivering sustainable revenue and earnings growth, backed by improvement in end-market demand, ability to attract new customers and opportunities for greater customer penetration through new product development.

Ecolab caters products and services to the hospitality, foodservice, institutional and industrial markets. The company’s U.S. Cleaning & Sanitizing and International divisions face stiff competition from Clorox (CLX - Analyst Report) and Church & Dwight (CHD - Snapshot Report).

To drive growth, the company continues to invest in strategic areas such as, product innovation, healthcare, water and energy and global pest elimination while rationalizing operating costs. Moreover, Ecolab remains focused on bringing new technologies aimed at reducing food safety risks. Moreover, the company is active on the acquisition front and is exploring opportunities to expand into emerging markets for growth.

Ecolab recently completed its acquisition of Illinois-based water treatment services major Nalco Holding Company. The merger has created a behemoth in the water treatment space with more than $11 billion in sales and operations in more than 160 nations.

Although we are impressed by Ecolab’s strong international exposure, we remain cautious about aggressive competition, raw material price fluctuations and dilutive impact of the hefty restructuring expenses on the company’s bottom line. We currently have a Neutral recommendation on Ecolab, which is supported by a Zacks #3 Rank (Hold).

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