The electrification of everything megatrend is driving Hubbell’s sales growth.
A rising dividend signals management’s confidence in its growth outlook
Lee Samaha (Hubbell): Electrification and utility solutions company Hubbell recently raised its dividend to a record $1.22 a quarter. While the current yield of 1.62% isn’t anything to write home about, the 9% increase in the dividend payout is an indication of the underlying strength of its business.
In a nutshell, Hubbell is a play on the electrification of the economy. It’s a compelling trend driven by the ongoing need to replace and upgrade existing transmission & distribution networks. At the same time, the growth of renewable energy, electric vehicles, the Internet of Things, and other technologies that require electricity to function is adding new sources of demand.
These solutions are known as being in “front of the meter” and are sold through its utility solutions segment, responsible for 58% of sales in 2022. They also include smart meters and control devices that manage how energy and data are transferred between utilities and operators – likely to be a growing market given advancements in smart technology.
The other segment, electrical solutions (accounting for 42% of sales in 2022), has “behind the meter” solutions that help operators and industrial customers operate their energy infrastructure efficiently.
The positive momentum in its business can be seen in the increase in management’s expectations for organic sales growth of 7% in 2023 from an initial estimate of 4%-6%. Management described its transmission end market has robust in the third quarter, and is seeing strength in renewables and data centers more than offsetting softness in telecom and consumer markets. Wall Street analysts are executing another year of high single-digit revenue growth in 2024, and given the strength in the electrification of everything megatrend, Hubbell could be set for growth for many years to come.
