Meet the Under-the-Radar S&P 500 Dividend Growth Stock That Has Been a 128-Bagger Since 2000

Core Insights - Rollins has delivered total returns of 12,700% since 2000, making it a 128-bagger investment [1] - The company is positioned for continued growth in the pest control industry, which is essential and non-discretionary [3] Group 1: Industry Dominance - Rollins has grown its sales nearly sixfold since 2000, becoming the largest operator in the pest control niche [4] - The brand Orkin, owned by Rollins, has the highest brand awareness in the U.S. pest control market, contributing to revenue growth of 8% over the last 15 years, compared to the industry average of 3% [5] - Long-term growth drivers include the rise of do-it-for-me services, increasing pet ownership, and stricter sanitation regulations [6] Group 2: M&A Strategy - Rollins has a successful track record of acquisitions, having completed hundreds of deals, including 44 tuck-in acquisitions in 2024 [7] - The company targets profitable businesses that complement its operations, consolidating a fragmented industry where over half of revenue comes from small operators [8] - Recent investment-grade ratings from Fitch and S&P Global enhance Rollins' access to cheaper credit for future acquisitions [9] Group 3: Financial Performance - Rollins has a cash return on invested capital (ROIC) averaging 34% since 2005, ranking in the top 10% of S&P 500 stocks [12] - The company has maintained a dividend yield of 1.2%, with an investor who bought $1,000 in 2000 now receiving$750 annually in dividends due to consistent payout increases [13] Group 4: Valuation - Rollins trades at a high price-to-earnings (P/E) ratio of 55, but its price-to-free cash flow (P/FCF) ratio of 44 is more relevant, reflecting its historical performance [14] - Despite a premium valuation, Rollins has doubled the market's returns over the past decade, justifying its price [15] - The company is expected to continue justifying its premium valuation through consistent sales growth of 8% to 10% annually [16] Group 5: Future Outlook - The pest control industry remains highly fragmented, providing Rollins with ample opportunities for growth through acquisitions [17]