Filtering Great Dividends

Investing In Pollution Control Systems Companies

Pollution control systems companies are serious businesses that engage in the design, development and implementation of consumer and industrial pollution control products such as air and water filtration systems, dust collectors and various scrubbers. While the business at first glance might scream boredom they do provide very essential services that enhance all our lives.

In fact, pollution control systems have been in the news a lot recently with regard to an irritating factory exhaust emanating from Huy Fong Foods, makers of the popular Sriracha Chili Hot Sauce based in Irwindale, California. For those who are not familiar with the story, sriracha factory neighbors complained about a strong smell and eye and throat irritation as a result of the chili sauce manufacturing process. While the story often made for entertaining headlines, the suffering endured by neighbors was no laughing matter. While lawyers battled out in court over the legal right of Huy Fong Foods to continue to produce its chili sauce, the case essentially centered on the factory pollution control system and air filtration system and scrubbers.

Another example of the importance of the pollution control industry made headlines last week as the South Coast Air Quality Management District in California announced that cancer risk from air pollution dropped in Southern California by as much as 65% since 2005. No doubt this was largely in part of increased regulations, cleaner burning diesel fuels and pollution control systems outfitted on many cars, trucks, cargo ships, locomotives and airplanes.

Of course, being dividend income investors we are most interested in the companies that can pay reliable and rising dividends over time. That being said, let’s review the few dividend paying companies in the pollution control industry.

First up is CECO Environmental Corp. (CECE). Based in Cincinnati, Ohio, CECE provides various air and water pollution control systems as well as pollution recovery services. The company also manufactures and markets components for industrial air systems such as filters and ducting. CECE currently yields 1.80% with a low payout ratio of 24.7% based on current cash flow. While not a high yielding stock, CECE does offer a very safe dividend. I would like to see a longer dividend history with this stock but so far dividends have been increasing steadily since 2011. On a valuation note the stock has a current PE of 36.74 which is high relative to the market as a whole but in line with industry peers. Forward PE looks a lot more enticing at only 11.67.

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Disclosure: Long NONE

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Comments

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Keith Park 2 years ago Author's comment

Hi John,

I couldn't agree with you more regarding the future of the pollution control industry. One of the things that attracts me the most about this sector is that each of these companies produce a necessary product that has to be replaced. The key ingredients to a long lasting successful business.

John Fitch 2 years ago Member's comment

Enjoyed the article Keith. The environmental industry, I believe, is going to be gaining more and more in popularity. Green initiatives seem to be popping up more and more all over the place. Pollution control, of course, plays a very large role in cleaning up the environment. While some of the yields for the stocks you mentioned might be low, I feel as if they all offer tremendous growth potential. Thanks for the tips I am going to begin doing my DD and will potentially allocate part of my portfolio accordingly.

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