Investors Were 25% Richer from Investing in Parker-Hannifin Stock

Parker-Hannifin’s (PH) YTD (year-to-date) returns through August 4, 2016, were more than three times the returns of the S&P 500 Index. PH stock rose from $96.66 in the beginning of January to $118.96 on August 4. That’s a 23.1% return YTD, which excludes its quarterly dividends.

Parker-Hannifin is often known as a dividend king with a yield of ~2.1%. It has a 59-year record of consecutive dividend increases. Investors in the broader Market would have earned just a 7.5% return from the S&P 500 Index in the same period.

In terms of investor returns, other diversified industrials (XLI) companies have also performed better than the S&P 500 index. Investors who took a long position in 3M (MMM) in the beginning of the year would have been richer by 21.1% by August 4, 2016. That excludes the steady quarterly dividends that 3M pays to investors. Similarly, Danaher (DHR) has risen 16.7% YTD, which is better than the S&P 500 at 7.5%.

As of August 4, 2016, Parker-Hannifin was trading at a trailing PE (price-to-earnings) multiple of 18.9x. That’s lower than its five-year high of 20.35x on December 30, 2013.

The company’s diversified industrial (IYJ) peer 3M (MMM) is trading at a trailing PE multiple of 22.7x, which is closer to its five-year high multiple of 23.1x it achieved on July 20, 2016. Danaher is trading at a trailing PE multiple of 19.5x, which is its five-year high.

The disparity in multiples of the three above companies is largely due to their margins. 3M’s segment margins of ~24% are way ahead of Danaher’s 18% margins, which are better than Parker-Hannifin’s 15% margins.