Stepan Company (SCL): Among the Low Profile Dividend Champions to Buy
We recently published a list of the 15 Low Profile Dividend Champions to Buy. In this article, we are going to take a look at where Stepan Company (NYSE:SCL) stands against other low profile dividend champions.
Companies known as Dividend Aristocrats belong to the S&P Index and have raised their dividend payments every year for a minimum of 25 years. On the other hand, Dividend Champions have also maintained at least 25 straight years of dividend growth, though they may not be part of the broader market.
It is possible to pursue a strategy that offers both income and growth. Companies that regularly increase their dividends—often referred to as dividend growers—are typically financially sound, well-managed, and of high quality. Over the long term, these businesses not only show lower levels of volatility but also tend to deliver better performance than the broader market, such as the S&P Equal Weight Index. According to a report by Guggenheim, companies that grew and initiated their dividends between May 2005 and December 2024 delivered an annual average return of 10.5%, compared with a 5.5% return of those companies that cut or eliminated their payouts during this period. The broader market produced a 10.4% return on an annual average basis, slightly underperforming the dividend growers.
The report also mentioned that dividend growth strategies have generally shown strong performance in both rising and falling markets. For investors, this offers a chance to benefit from long-term market gains while also helping to preserve more value during inevitable market downturns.
Dividend-paying stocks provided investors with a degree of stability during the volatile month of March, according to Bank of America, which highlighted several standout names during the market's rough patch. The firm noted that value and dividend-focused stocks performed well that month, as concerns over President Donald Trump's tariff policies unsettled the broader market. The firm's quant strategist, Nigel Tupper, said the following in an April 11 report.
'In March, as global equities fell -4.1% on concerns tariffs could increase and slow growth, the best performing global styles were Value and Dividends,'
With investor demand for dividend stocks on the rise, many companies have been steadily increasing their payouts. A report from Janus Henderson revealed that global dividend payments reached an all-time high of $1.75 trillion in 2024, reflecting a 6.6% increase on an underlying basis. The overall headline growth was 5.2%, influenced by fewer one-off special dividends and a stronger US dollar. Out of 49 countries in the index, 17— including major contributors like the US, Canada, France, Japan, and China—set new records for dividend payments. Overall, 88% of companies worldwide either raised their dividends or maintained them throughout the year. Looking ahead, Janus Henderson forecasts that global dividends will rise by 5.0% on a headline basis in the coming year, reaching a new record of $1.83 trillion. Although the stronger US dollar is expected to weigh on headline growth, the underlying growth rate is projected to come in slightly higher, around 5.1%.
An industrial complex with its towering smokestacks, showing the scale of the company's specialty chemicals operations.
Our Methodology:
For this article, we scanned a list of Dividend Champions, which are companies that have raised their payouts for 25 consecutive years or more. From that list, we picked some lesser-known companies with sound financials and strong balance sheets and ranked them according to hedge funds having stakes in them, as per Insider Monkey's database of Q4 2024.
At Insider Monkey, we are obsessed with hedge funds. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter's strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points ().
Number of Hedge Fund Holders: 17
Stepan Company (NYSE:SCL) is an Illinois-based company that deals in specialty and intermediate chemicals. The company delivered strong earnings results for fiscal year 2024. Adjusted EBITDA increased by 4% year-over-year, even with the impact of several one-time charges and pre-operating expenses related to its new Pasadena facility. The Surfactants and Specialty Products segments recorded solid double-digit gains in Adjusted EBITDA, though these were partly offset by weaker demand in the Polymers segment.
Overall, global sales volume rose by 1%, driven by a 2.5% increase in the Surfactant business, with notable growth momentum seen across several of the company's key strategic markets.
Stepan Company (NYSE:SCL) also maintains a solid financial position, supported by strong cash generation. In the fourth quarter, Stepan reported $68.3 million in operating cash flow and $32.1 million in free cash flow. This robust cash flow has allowed the company to raise its dividend for 57 consecutive years, placing it among the best Dividend Champions to invest in. Its quarterly dividend comes in at $0.385 per share for a dividend yield of 3.25%, as of April 17.
Overall, SCL ranks 12th on our list of low profile Dividend Champions to invest in. While we acknowledge the potential of SCL as an investment, our conviction lies in the belief that some deeply undervalued dividend stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for a deeply undervalued dividend stock that is more promising than SCL but that trades at 10 times its earnings and grows its earnings at double digit rates annually, check out our report about the .
READ NEXT: 20 Best AI Stocks To Buy Now and 30 Best Stocks to Buy Now According to Billionaires.
Disclosure: None. This article is originally published at .
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