OTIS, KONE, SCHINDLER - ELevate Your Portfolio With These Dividend Growth Stocks!

Good day, fellow investors. Otis, KONE, Schindler, the elevator stocks, defensive as they service things more than they build new things. Let's see how this might fit your portfolio. I've done a research for my research platform. I've started with Otis and then it also translated into KONE, Schindler, just to get an investing perspective. I've got some comments to research Otis. The stock is down about 40% from the peak a year and a half ago. The P/E ratio now is 19, the dividend yield 2.48%, the market capitalization 28 billion. So, it might just not be big enough for Wall Street and therefore offer opportunities for value investors. As a value investor, I look for businesses that have the ability to compound, margin of safety, at a fair price. And then the goal is to see how those fit my portfolios. I'm now working, starting the research process to do the diversified portfolio. Part of that will likely be also on YouTube, hopefully. I have my model portfolio, which is the core that represents the research platform, value, margin of safety, double digits earnings, owners earnings expected returns. And the personal portfolio is I just buy the best option for that year. And if you go to my platform, you have the free investing course and my research platform. You can read a little bit what I do, but if you want to read this research report, here you have it. Otis, KONE, Schindler, it will be on free preview and you can read that there among other things. If you want to check it, 21-day money-back guarantee. So, Otis elevator escalator business growing. The business should be growing because the market should be growing. They have 2.5 million escalators and elevators that they are servicing. This is the core of the business, 14.4 billion in sales and 2.5 billion people moved daily. The escalator and elevator market is expected to grow 2.9% per year over the next 5 years. Some estimations see the market even doubling over the next decade. That is always a positive having a good tailwind when it comes to investing. If we look at the business, the core of it is service. Good stable profits. A little bit the margin is a little bit down on incremental costs, inflation, and these service contracts that usually last 4 to 5 years. So, they have not yet repriced them, and the new prices should be higher, and therefore we could see some growth. New equipment sales are down. Very bad situation in China. The growth is gone there. Much less new sales. So, that is something plaguing the whole industry. The financial outlook after Q2 was down a little bit. So, we can call it flat, but still adjusted free cash flow 1.5 billion, and they are keeping the share repurchases there at 800 million. All in all, despite the decline in guidance, still 1.5 billion in free cash flows. Earnings per share expected to be flat for the year. If we look a little bit at the financials, we can see here, okay, the market has been growing, but these companies have not really grown their revenues, which means there is some significant competition. Earnings per share over the last decade have grown, but not that much. This is a little bit of inflation, a little bit of buybacks, and you go from 2.4 to 3.5. Four expected now adjusted. Okay, slow and steady grow, nothing spectacular, but pretty interesting. So, Otis has been spun off, and therefore whenever a company is spun off, the parent company dumps as much debt on it. So, they have significant debt, as you can see here, and negative equity because they are a cash flow company, and as they do buybacks above book value, this equity becomes even more negative. As long as they can keep the cash flow stable, not a concern, but as long. If we look at the free cash flow, pretty stable, pretty high. This is what the investors are buying. They're paying dividends, growing dividends, and they are doing repurchases. If we look at the yield, buyback yield, a little bit less than 3%. Dividend yield, also 2.5%. So, a total shareholder yield of around 5%. So, I did an intrinsic value calculation, the standard that we usually do. I took the dividend, estimated here a terminal multiple of 25, which gives me a 4% dividend yield. For the growth, for everything, I see that as a good absolute number, not a relative number that usually Wall Street looks at. If we estimate a growth rate of 6% going forward for the dividend, the intrinsic value is 43, significantly lower than the current stock price. Let's see what's priced in now. We have 8% growth per year in the dividend, and the dividend remaining, the yield in 10 years still being at 2.5%. That would give the fair value for the stock at current levels, which means okay, a little bit priced for really good things. A margin of safety price, lower growth rate, dividend of 6-7%. Why am I saying six or five? Because if there is a disaster, recession, whatever that might happen here and there, then yes, Otis will likely be stable from the services, from this. But, when it comes to valuation, the market will say, "Okay, for that stability, the market is now happy with 2.5% and the growth. For that stability, I want 5% because there will not likely be any growth for a year or two." And that is a 50% decline from where we are. So, we get to 40-45, which would be something very interesting to look at. Of course, always comparing to other opportunities. And that is why I have put here Otis. We will follow it over time, see how it works, and compare also to the other things that we have in our intrinsic value template that you can download for free on my free investment course. Let's look a little bit at the competitive situation. Otis is the leader, followed by KONE, thyssenkrupp, Schindler. Okay, KONE a little bit better. The stock is doing a little bit better. They are focused on dividends. Don't think there are buybacks. If they would lever up like Otis, they could do 7 billion of buybacks and push certainly the stock to double. But, that's a little bit crazy. Uh same principles, business modernization, IT, connectivity. All the three players are working on that. You can see here the greater China bad situation from a selling perspective, but still good on modernization. The things that you click when you go into connectivity, checking out less maintenance, less travel for service people, less costs, better efficiency, better profitability. Sales also 3% growth, stable over the years, slow and steady, good cash flows, close to 2 billion, 1.something. So, from that cash flow perspective, they are a little bit cheaper than Otis, higher cash flow yield, a little bit higher dividend yield, much better balance sheet with positive equity, net interest-bearing debt at practically zero, so not that impactful. Made also that calculation there, still a bit cheaper from that perspective depending on the growth rates going forward. I have lowered here the dividend required returns. And okay, not cheap, not a value investment with margin of safety, but an interesting situation for those who are looking. There are a little bit of differences between the players on geographical sides, things like that, maintenance, more maintenance, more service. Someone started switching earlier, someone later. Swiss company, Schindler, guidance confirmed, valuation again a little bit below the current stock price, but we are in an exuberant stock market. So, we'll follow them and when this gets to 1, 1.something, if it ever gets, we'll see. That's what I do. My conclusion is that these are very interesting businesses. I like the cash flows, I like the service business, I like the stability there, the predictability of the cash flows, the oligopoly that has been created, the growth tailwinds, Asia development, global, everything is positive. Don't like that much the debt with Otis. And also don't like that much the valuation because for what I said that I liked, I have to pay a pretty good deal. Investing is about price. Therefore, okay, let's put it here. I'll do a few hundred more. If you like this analysis, subscribe and then we'll see where we get. Thanks for watching. If you want to check my portfolios, check my research platform.