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Friday, 10/31/2003

Chemical Imbalance
By Nich Sheldon
PX - Praxair Inc

Company Description

Praxair, Inc. is the largest industrial gases company in North and South America, and one of the largest worldwide, with 2002 sales of $5.1 billion. The company produces, sells and distributes atmospheric and process gases, and high-performance surface coatings. Praxair products, services and technology bring productivity and environmental benefits to a wide variety of industries, including aerospace, chemical, electronics, energy, food and beverage, healthcare, manufacturing, metals and others. For more information, visit Praxair on the Internet at

[Source: Company Press Release]

Reasons to Invest:

This Week's Drip of the Week is Praxair Inc (NYSE:PX). Praxair just announced and beat earning for the third quarter of 2003. Several companies are meeting estimates for the Q3 and a few are beating them, but Praxair beat last years Q3 earnings by $0.11. This, coupled with an increase in net income, sales, and profitability is why we are spotlighting PX as this week's Drip of the Week.

A Look at the Figures

Praxair's earnings came in at $0.91 cents per share, which in $0.01 higher than analysts estimates of $0.90. On top of that, their net income rose to $150 million which when compared to last years third quarter net income of $131 million is impressive to say the least (especially in an economy as unpredictable as this). Sales of PX rose 9 percent to $1.41 billion compared to $1.29 billion just a year ago. Operation profits rose by 5 million to $240 million for the third quarter.

Regional Sales

In respects with regional growth, sales grew eleven percent in Europe to $168 million. In North America sales rose nine percent to 918 million. The company reported 21 percent sales growth in South America to $187 million and in Asia sales rose 23 percent to $103 million. Most of the sales growth in Asia was catered to an increase in sales in China.

I suppose you might feel that the largest industrial gas company in North and South America should be showing greater numbers with each passing quarter but this is not the case for all Chemcial suppliers - take for instance PX's competitor Air Products and Chemicals Inc (NYSE: APD) which came in a penny under Wall Street's expectations. Not to mention their sales fell 9 percent on the quarter, further proving that PX's strength in the third quarter makes it a healthy and attractive Chemical Index (DJUSCH) Drip candidate for your portfolios.

Dividend Information and Increase

PX yields a descent dividend of 1.54 percent, which comes out to an annual dividend of 1.08 per share per year. The company announced on Wednesday (10/29/03) that they were increasing their dividend by 25 percent, which is reflected in their yearly dividend price of $1.08. Shareholders on record as of December 5th, 2003 will catch the benefits of this dividend increase on December 15th - the new dividend payable date.

The company reported that this increase in dividend is a reflection of their substantial improvement in operating cash flow achieved by their company over the last several years. Furthermore, the strength in the company's balance sheet and credit rating helped to provide the justification for this dividend increase.

Now I know personally that a dividend increase could only mean more payouts and possibility for further profit for my portfolio, but what is even more exciting about this drip is that they have increased their dividend every year for the past ten years since being listed on the NYSE. Moreover, this is the second dividend increase for PX this year alone.

Stock Split Announcement

While we Drip Investors are not playing stocks based upon companies announcing stock splits, PX announced a 2-for-1 stock split in the same report in which they noted their dividend increase. The payable date for the stock split is set for December 15th, 2003 to shareholders on record December 5th.

Drip investors should note that this is the same payable date and distribution date as the new dividend price; however, the dividend is based upon a pre-split basis. Unlike the annual dividend increase for PX, this is the first stock split for PX since being listed in 1992.

The company said they are splitting their stock in order to lower the price and attract new investors. This is almost reason enough to get invested now as you will own twice the stock come December 15th, and receive twice the dividend, as noted on a pre- split basis.

Performance History

Over the past 52-weeks PX's price change has been +28.61 percent, which is not shabby for a stock in the Chemical Industry. In relation to the 52-week change for PX when compared to the S&P 500 their price change was +8.81 percent. On October 30th, 2003 Praxair hit a new all time high of 70.61, over 20 points higher than their 52-week low of 50.03 (3/12/03).

Praxair's dividend percentage growth rate for the next year is estimated to be 11.77 percent. Over the next three years the company is expecting this percentage to be around 10.72 percent, and over the course of five years it is predicted to be around 11.55 percent.

According to (now a part of Yahoo!) their risk alert summary for PX is very attractive. Multex is actually reporting that there is no risk in new entries of PX's stock. Praxair passed all of the six tests, which measure the possibility for risk in individual stocks. The passing grades in which they received were for estimate revisions, analyst recommendations, institutional selling, shorted shares, price deterioration and price momentum.

From what I gather this risk alert summary measures if people are becoming less enthusiastic about any given stock, apparently PX is not one of those stocks, which in my opinion is good to know.

The last thing I would like to note about PX is that over the past three months, analyst recommendations for the stock have been increasingly more bullish. There was one analyst recommending a strong sell for the company for the past three months, but this analysts has upgraded their recommendation from Strong Sell to Sell. While having a sell rating is not necessarily a good indication to jump into a stock, another analyst added PX to their strong buy list this month, and two others added PX to their buy list. With that said, I always try and weigh the good with the bad and then balance the two out, sort of - so to speak - making this chemical imbalance, well... balanced (Big Grin).

This ends another exciting episode of the Drip of the Week. Stay tuned next week, as we will spotlight another stock worthy of the limelight.

Have a Great Halloween!

Until Next Week,
Nich Sheldon

Broker Recommendations

Strong Buy         3
Buy                5
Hold               4
Sell               1
Strong Sell        0

Brokers Covering  13

DRIP Information:
Shares to Qualify = 1
Auto-reinvestment = No
Accept Foreign Accounts: Yes
Temper Enrollment:  Yes

Min/Max Investment = $50-$24,000/Year

Reinvestment Fees - 
Dividend investment fees: None
Cash investment fees: None
Auto reinvestment fees: None Available

Transfer Agent:
Bank of New York

Corporate Headquarters:
39 Old Ridgebury Road
Danbury, CT 06810
Phone: (203) 837-2000
Fax: (203) 837-2001


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