The DivGro Weekly—28.06.24

164 Consecutive dividend increases

Weekly Dividend Progress

This week we received further real-time, tangible evidence of outstanding business progress when Heico increased its dividend y 10%. We also became entitled to our quarterly dividends from FirstService and Stryker, both meaningfully higher than this time last year.

How We Are Tracking

Since DivGro's inception we have predicted and benefited from 164 consecutive dividend increases across our portfolio companies, with no decreases. The average rate of these dividend increases is 14.8%.

Heico

In 1990, the Mendelson family assumed control of Heico, ushering in a gilded era of stellar dividend growth coupled with phenomenal appreciation of the company’s stock price — multiplying more than 860x. The Mendelsons identified an opportunity in hiding: to copy highly engineered aviation afterparts without the burden of immense upfront R&D costs suffered by dominant OEMs. How could they identify such an opportunity? The Mendelsons recognised a lucrative loophole: given intellectual property on aviation afterparts is seldom strictly protected, copies cannot be effectively deterred. Plus, while OEMs must necessarily charge super-premium prices for their aftermarket parts in order to recover their upfront costs over the lifetime of an aeroplane, these premium prices afford Heico an opportunity to undercut the market. The result? Heico manufactures equally sophisticated, government-approved replacement parts that are simultaneously profitable and sold at a discount of 30-50 per cent compared with traditional OEMs. Having recently absorbed its largest competitor, Heico has expanded its catalogue to include approximately 20,000 replacement parts today. With time onside as technology advances and modern aircrafts comprise millions of parts, Heico’s future is flush with opportunities to grow its afterparts range and thereby extend its formidable dividend record.