Bristol Gate Capital Partners Sold Zoetis (ZTS) Due to Deteriorating Dividend Growth

Core Insights - Bristol Gate Capital Partners emphasizes investing in companies with strong free cash flows, disciplined capital allocation, and high dividend growth for superior risk-adjusted returns [1] - The market has shifted towards AI leaders since late 2022, leading to underperformance for the fund due to narrow market breadth [1] - Recent outperformance of S&P US Dividend Growers, S&P 500 Dividend Aristocrats, and S&P 500 Equal Weight indicates a potential shift in market dynamics, providing opportunities for investors [1] Company Focus: Zoetis Inc. (NYSE:ZTS) - Zoetis Inc. is an animal health company specializing in medications, vaccines, and diagnostic products, with a market capitalization of approximately $49.953 billion [2] - The stock closed at $113.35 on March 27, 2026, with a -12.10% return in the past month and a -31.16% return over the past twelve months [2] - In Q4, Zoetis was a significant detractor in the Materials and Consumer Discretionary sectors, facing challenges such as fewer US veterinarian visits and increased competition [3] Financial Performance and Dividend Growth - Zoetis reported earnings that exceeded consensus expectations, but sales fell short, leading to a lowered annual guidance and a stock decline [3] - The company announced a dividend increase of only 6% for the coming year, a significant slowdown compared to its historical annualized dividend growth rate of 22% during the holding period [4] - The decision to exit the position was influenced by the deteriorating dividend growth outlook and setbacks related to its key osteoarthritis drug, Librela [4]