A $25B market capitalization company is hitting the rock bottom right now! No pun intended, but Rockwell Automation (ROK) is DOWN almost 40% year-to-date and they are down OVER $140+ from their 52-week high! The stock market is tumbling, is it time to buy this cheap, undervalued, dividend growth stock?! We took a deep dive to find out.
Rockwell Automation (ROK) Stock
Based in Illinois Rockwell (ROK) is a major player in the industrial space, competing with the likes of Emerson, Honeywell, ABB, just to name a few. Their market capitalization is approximately $25 billion and their stock price has been as high as $354! What happened here?
First, you have the macro-economic events, such as inflation, the great resignation, the supply chain issues, rising interest rates; the list really goes on. Since they are in the industrial space – they are heavily impacted by all facets here – labor shortages, higher costs, delays in supplies/parts, you name it.
Second, going along with the entire stock market that is down 13% year-to-date (as you can see below), Rockwell is falling right along with it.
Third, Management released an OKAY earnings release. However, the big reason for the stock drop to Rockwell’s stock price, is due to the lower guidance management revised to:
That would definitely cause the stock price to plummet, as guidance was near $11 and is now down to $8. Makes sense why the stock price would drop 15% in one day, as we saw on May 3rd.
Not only is Rockwell Automation (ROK) down 37% year-to-date, they are down $141.25 from their 52 WEEK HIGH?! Literally, from the high point they are down over 39%, amazing. That is exactly why this dividend growth stock caught my eye again, as they are in my dividend stock portfolio, and I am curious if it’s time to buy more of this dividend stock at the current price.
Let’s look at the dividend payout chart for Rockwell. A very nice sight to see for Rockwell stock, as the trend for the TTM Dividend Payout (i.e. the Trailing Twelve Months) is nothing but trending WAY up. If you can’t tell, they’ve gone from approximately $1 per year to well over $4 per year to their dividend in such a short time frame.
I believe it’s time to look at Rockwell stock through the Dividend Diplomats Stock Screener, right?!
Rockwell Automation dividend stock analysis
I cannot wait to put Rockwell stock through the Dividend Diplomat Stock Screener! Here, we focus on 3 main dividend stock metrics:
1.) Price to Earnings Ratio (P/E): We look for the price to earnings ratio < the S&P 500 and the competition.
2.) Dividend Payout Ratio: The preferred dividend payout ratio is < 60%. In fact, we believe the perfect payout ratio is between 40% and 60%.
3.) Dividend Growth Rate: Given we are dividend investing on our way to financial freedom, as we believe dividend income is the best source of passive income, we look at the 5 year dividend growth rate. In addition, we review how many years the company has increased their dividend.
1.) P/E Ratio: So not the cheapest stock out there, but quality does cost just a little bit more. Based on expected 2022 earnings, the Price to Earnings ratio for Rockwell Automation (ROK) is approximately 20x 2022 expected earnings. The S&P 500 is currently over 21x. If earnings truly is in the ~$8 range, then the P/E ratio for ROK is higher.
2.) Dividend Payout Ratio: A perfect dividend payout ratio at 42%. They are right in that sweet spot of 40-60%. One of the best reasons to own Rockwell Stock! Safety in the dividend, but they also reinvest over half of their earnings back into the business.
3.) Dividend Growth Rate: Now, dividend investors will love to see this. Growing that dividend for well over 12 straight years and the average dividend growth rate is over 8%, what is not to love about Rockwell’s dividend philosophy? That’s called a growing passive income stream, folks.
Lastly, we’ll take a look at the dividend yield. As an investor, you want to know how much owning this dividend stock pays you now! The yield for ROK is 2.10%. That is higher than the S&P 500 by approximately 70 basis points. Not too shabby. Question is though… should it be higher/do we see a lower stock price in the near-term, still?
is Rockwell Stock a Stock to buy…now?
Now that we’ve gone through the metrics, is ROK a stock to buy for the dividend stock portfolio?
At this time, I am actually going to be on the sidelines for Rockwell (ROK) stock. Not because I don’t like them, hell I own them. However, I believe due to lower guidance, the stock price should also follow-suit and drop a few dollars in share price. In fact, I would not be surprised if we saw them go below $200 per share.
If you head over to our YouTube channel, you’ll find other undervalued dividend growth stocks that are higher on my list for stocks to buy now!
How about you? Do you own Rockwell stock? Do you think ROK is a stock to buy now in this significantly volatile stock market? Share your comments and feedback below!
As always, thanks for stopping by, good luck and happy investing!
-Lanny