1 Magnificent Dividend King Down 25% to Buy Right Now Near a Once-in-a-Decade Valuation

Core Viewpoint - Tennant is positioned as a promising investment opportunity due to its strong market leadership, growth potential in autonomous mobile robots (AMRs), and a solid history of dividend payments despite recent share price fluctuations [1][2][13] Company Overview - Tennant is the global leader in mechanized cleaning equipment, holding a 14% market share in the $9 billion industry, with a dominant presence in North America, Mexico, and Brazil where it commands a 25% share [3] - The company generates 36% of its sales from aftermarket revenue, which historically equals 80% of the original equipment cost, providing a recurring revenue stream [4] Growth Potential - Tennant has intensified its focus on AMRs, signing an exclusive technology agreement with Brain Corp, which enhances its product offerings and potential for new recurring revenue from software subscriptions [5] - The launch of the X4 ROVR AMR has led to increased production to meet anticipated demand, with AMR unit sales trending well ahead of previous years [6] Financial Performance - Tennant's return on invested capital (ROIC) has improved, indicating better profit generation from its debt and equity, which is crucial for stock performance [7] - The company has raised its dividend payments for 51 consecutive years, with a current payout ratio of 19%, suggesting room for larger increases in the future [8] M&A Strategy - Tennant has over 800 merger and acquisition targets in its pipeline, and successful acquisitions could further enhance its growth and profitability [9][10] Valuation Insights - Tennant's earnings yield of 6.3% is near 10-year highs, indicating a potentially attractive valuation [11] - The company only needs to grow free cash flow by 3% annually over the next decade to justify its current price, with management guiding for sales growth of 3% to 5% [12]