Is Pentair plc (NYSE:PNR) the Best January Dividend Stock to Buy?

As the new year approaches, investors are on the lookout for dividend stocks that offer a combination of steady growth and attractive yields. One company that has caught the attention of many is Pentair plc (NYSE:PNR), a global leader in water treatment and flow control solutions. In this article, we will explore the reasons why Pentair plc could be an excellent choice for investors seeking a January dividend stock.

Strong Dividend Growth and Yield

Pentair plc has a long history of paying dividends, with a 49-year streak of consecutive dividend increases. The company's quarterly dividend has been growing at an impressive rate, with an 8.7% increase announced in December 2024, extending its streak to 49 consecutive years. This consistent dividend growth, coupled with the company's strong financial performance, supports the sustainability of its dividend payments.

Pentair's current dividend yield stands at 0.99%, which, while lower than the Industrials sector average of 2.36%, is still attractive for investors seeking steady income. The company's forward P/E ratio of 20.84 indicates that its stock is relatively undervalued compared to its peers, providing an opportunity for investors to buy in at a discounted price.



Growing Demand for Water Solutions

Pentair's business model aligns with the increasing global demand for water solutions, driven by factors such as population growth, urbanization, and environmental concerns. As the world's population grows and urbanizes, the need for clean, safe, and efficient water management solutions becomes more critical. Pentair's products and services cater to these growing demands, providing a solid foundation for its dividend growth.

The company's diverse product portfolio, which includes fluid treatment and pump products, water treatment and filtration systems, and pool equipment and accessories, enables it to serve a wide range of customers and industries. This diversification helps maintain steady revenue streams and supports dividend growth.

Strong Financial Performance and Cash Flow Generation

Pentair has consistently delivered strong financial performance, as evidenced by its revenue growth and earnings per share (EPS) growth. In the third quarter of 2024, the company reported revenue of $993.4 million, a slight decrease of 1.5% compared to the same period the previous year. However, this revenue surpassed analysts' expectations by $5.02 million. The company's operating income for the quarter remained steady at $180 million year-over-year. Pentair has updated its full-year 2024 GAAP EPS forecast to about $3.70 and increased its adjusted EPS guidance to approximately $4.27.

Pentair's strong financial performance is supported by its ability to generate significant cash flow. In the third quarter of 2024, the company generated an operating cash flow of $249 million, up from $162 million in the same quarter last year. Its free cash flow also grew to $234 million, compared to $143 million in the previous year's quarter. This strong cash flow generation enables Pentair to maintain and grow its dividend payments while investing in its business for future growth.



Analyst Recommendations and Hedge Fund Sentiment

The number of hedge funds tracked by Insider Monkey owning stakes in Pentair plc (NYSE:PNR) grew to 47 in Q3 2024, from 40 in the previous quarter. These stakes are worth over $1.7 billion in total. Among these hedge funds, Impax Asset Management was the company’s leading stakeholder in Q3. This growing interest from hedge funds indicates that Pentair is gaining traction among professional investors.

Conclusion

Pentair plc (NYSE:PNR) offers investors a compelling combination of steady dividend growth, an attractive yield, and a strong business model that aligns with growing global demands. The company's strong financial performance, cash flow generation, and analyst recommendations make it an attractive choice for investors seeking a January dividend stock. As the new year approaches, investors should consider adding Pentair plc to their portfolios to take advantage of its dividend growth potential and attractive yield.