Is Nordson Corporation (NDSN) the Best Dividend Growth Stock to Buy and Hold in 2025?

Nordson Corporation (NDSN) has been a standout performer in the Industrials sector, particularly in the Specialty Industrial Machinery industry. With a strong focus on innovation, strategic acquisitions, and operational improvements, Nordson has consistently rewarded shareholders through dividend payouts and share repurchases. As we approach 2025, investors may be wondering if Nordson is the best dividend growth stock to buy and hold. Let's examine the company's dividend growth, sustainability, and potential to determine if it's a suitable investment for the coming year.



Dividend Growth and Sustainability

Nordson Corporation has a strong track record of dividend growth, with a 14.71% increase in its dividend yield over the past year. This growth is higher than the average of the bottom 25% of dividend payers in the US market (0.684%) but lower than the average of the top 25% of dividend payers in the Industrials sector (9.52%). Nordson's high Dividend Growth Potential Score (DGPS) of 3.49% signals potential dividend growth, while its strong Dividend Sustainability Score (DSS) of 70.86% indicates its robust capacity to uphold current dividend levels.



Innovation and New Product Development

Nordson's focus on innovation and new product development has been a key driver of its dividend growth. The company consistently invests in research and development to create new products and technologies that cater to evolving market demands. This strategy has enabled Nordson to expand its product offerings, enter new markets, and maintain a competitive edge. For instance, in August 2024, Nordson acquired Atrion Corporation's three major businesses, Halkey Roberts, Atrion Medical, and Quest Medical. This acquisition expanded Nordson's medical offerings in the infusion and cardiovascular therapies market, providing access to new customers, regions, and product lines. The buyout also boosted total revenues by 4.8% in fiscal 2024, demonstrating the positive impact of strategic acquisitions on the company's growth.

Operational Improvements and Cost-Cutting Measures

Nordson's strong focus on operational improvements and cost-cutting measures has also played a significant role in its dividend growth. In fiscal 2024, the company paid out dividends of $161.4 million and bought back treasury shares worth $33.3 million. Additionally, in August 2024, the company hiked its dividend by 15% to 78 cents per share. The company's Industrial Precision Solutions segment has been a significant driver of its dividend growth, with sales from this segment increasing 6.8% year over year in fiscal 2024. The Medical and Fluid Solutions segment has also contributed to Nordson's dividend growth, with the acquisition of Atrion Corporation's businesses expected to further boost its revenues and dividend growth.



Potential Challenges and Risks

While Nordson Corporation has demonstrated strong dividend growth and sustainability, there are potential challenges and risks to consider. The company's Advanced Technology Solutions segment has experienced weakness, with revenues declining 11.6% in fiscal 2024. Supply-chain constraints, particularly in the medical device business, remain a concern for the company. Additionally, the escalating costs and expenses have been a major concern, with the cost of sales and selling and administrative expenses increasing year over year in the fiscal fourth quarter.

Conclusion

Nordson Corporation's strong focus on innovation, strategic acquisitions, and operational improvements has driven its dividend growth and sustainability. With a high DGPS and strong DSS, Nordson provides a promising overall dividend outlook, balancing both sustainability and growth potential. While there are potential challenges and risks to consider, Nordson's solid dividend growth and strong fundamentals make it an attractive investment option for 2025. As always, investors should conduct thorough research and consider their individual investment goals and risk tolerance before making any investment decisions.